Status: 02/21/2022 10:15 a.m
The number of savings banks in Germany has been falling for years. Now the process could accelerate, because more savings banks are merging again. This also has consequences for customers.
The savings banks Paderborn-Detmold and Höxter are currently considering a merger, as are the savings banks Moosburg and Freising. According to media reports, the Kreissparkasse Steinfurt and the Verbund-Sparkasse Emsdetten-Ochtrup and the savings banks Mittelfranken-Süd and Ingolstadt-Eichstätt are also negotiating a merger. This continues a long-term trend. Because German savings banks have been merging for years: while there were still 562 institutes in Germany in 2000, according to the German Savings Banks and Giro Association (DSGV), there are currently only 367 savings banks.
This development is likely to continue in the coming years. “The DSGV assumes that the moderate merger movement of the past few years will continue, but we do not see a wave of mergers,” said the DSGV when asked by tagesschau.de. In fact, the phenomenon at the savings banks is manageable – last year there were just six mergers.
The situation at the Volksbanks is different: After there were fewer mergers during the Corona crisis, they increased again significantly last year. More than 40 mergers took place in 2021, according to consulting firm Zeb. While there were still more than 1,700 cooperative banks at the turn of the millennium, the number has now shrunk to less than 800. And the cooperative bank already has declarations of intent for 15 mergers for the current year: “In view of the unchanged challenges posed by negative interest rates, regulations and digitization, but also in view of the transformation efforts towards a sustainable economy, this process will continue”, predicts the chairman of the board of the cooperative association, Ingmar Rega.
“Outdated Business Model”
The mergers are primarily driven by regulation: “The constantly increasing supervisory requirements” are an ever-increasing burden, especially for small and medium-sized institutions, according to the DSGV. Michael Koetter, head of the financial markets department and deputy president at the Institute for Economic Research in Halle (IWH), sees another reason why there has been a trend towards mergers for years: “The savings banks in particular can, with their outdated business model, in the current environment of zero interest rates and hardly earn any money from their too small company sizes.”
The expert explains that the critical size at which banks are profitable has been increasing for years. Because the savings banks still earn most of their money with the actual core business of the banks: Deposits from savings are granted as loans to companies and private individuals for a fee. However, the zero interest rate policy, which means that banks grant loans at very low interest rates, is reducing the banks’ income: “Together with the high fixed costs that savings banks operate, for example by operating branches in regional markets that are ultimately defined politically and not economically, becoming more and more unprofitable,” explains the expert from the IWH in an interview tagesschau.de.
The types of banks in Germany
The German banking system is one of the largest in the world, the number of financial institutions is higher here than in other countries. This is mainly due to the internationally unusual structure of the German banking system: in Germany there are three different types of banks: private banks, cooperative credit institutions and savings banks. Savings banks and cooperative banks are mainly active within a defined business area. Savings banks are usually under municipal sponsorship and are committed to the non-profit principle.
New account numbers and some higher fees
Mergers are an obvious consequence: “There is already close cooperation in certain services that lead to cost savings.” For years, one data center has been responsible for all savings banks instead of separate data centers for the individual institutes. This makes the work of the savings banks more efficient. Previous mergers have also brought other advantages: “The district reforms after the fall of communism, in which districts were merged, also forced some savings banks to merge. The savings banks that emerged from this were significantly more profitable and customers were also able to benefit from lower capital costs.”
At the same time, the expert at the IWH also refers to the state banks: “Despite all the need for further consolidation of local savings banks, the need for streamlined structures at the state banks is probably even more urgent – and even more political!”
However, David Riechmann from the consumer advice center in North Rhine-Westphalia points out that there are always higher costs for customers when the fee models are adjusted. “In some cases, new account numbers (IBANs) are also assigned,” said the consumer advocate. Affected customers should always pay attention, as the responsibilities of the employees can also change.
Fewer and fewer Sparkasse branches
At the same time, the mergers often mean that branches are closed. The DSGV denies this: “The merger has no influence on the business activities in the respective branch.” Accordingly, mergers do not automatically lead to the closure of branches.
And yet the number of branches has also been falling for years: while there were still almost 17,000 branches of the savings banks at the turn of the millennium, the number fell to just over 8,000 by 2020. For savings bank customers, the closures mean that, in addition to the loss of personal advice on banking transactions, there are fewer and fewer ATMs where money can be withdrawn, deposited or transferred. This development is becoming increasingly problematic, especially for older people and bank customers who do not want to use online banking.