The financial crisis was a long time ago, but it is not really over – neither in Germany nor in other European countries. Even after 2008, taxpayers had to save banks again and again, and the federal government continues to hold a stake in Commerzbank. The latest case: At the end of 2019, Lower Saxony, Saxony-Anhalt and the local savings banks had to put 3.6 billion euros into the Nord-LB, which had gotten rid of ship loans. Instead of winding up the Landesbank, the federal states and the savings banks finally agreed, after months of hanging, to invest in the bank again. Savings banks and Landesbanken gave 1.1 billion for the rescue operation, the rest of the country took over.
The verdict of the banking supervisors after the Nord-LB case was unequivocal: the ECB and the German financial supervisory authority Bafin consider the savings banks with their multi-layered system of mutual protection to be too slow, and in the event of an emergency, the public-law institutes think a lot from the supervisors’ point of view too little money ready. They are therefore urging that the savings banks and Landesbanken increase the funds available for rescue operations by around five billion euros, whereby the funds for securing deposits and institutions are to be separated. Otherwise, they threatened, they would lose important regulatory privileges.
According to SZ information, the savings banks and Landesbanken have now agreed on a solution after difficult negotiations, which they intend to present to the ECB shortly. This Friday, the general meeting of the German Savings Banks and Giro Association (DSGV) in Berlin is to decide on the necessary amendment to the statutes. From Sparkasse circles it was said that it had not yet been conclusively clarified whether the supervisory authority would accept the proposals, but that they were confident. A DSGV spokesman said that key issues relating to the common security system are on the right track. The aim is to come to a decision in the committees and to implement it. “This further strengthens the bank security of the Sparkassen-Finanzgruppe, which is advantageous for our customers,” said the spokesman.
“Compromise that can be agreed”
Oliver Stolz, President of the Savings Banks and Giro Association for Schleswig-Holstein, expressed himself somewhat more clearly: After many constructive discussions, a good and unanimous compromise had been reached in the Sparkassen-Finanzgruppe. “I am optimistic that the alliance will succeed and that the ECB will also meet with approval,” said Stolz.
The plans provide that the savings banks have to save 250 million euros annually from 2025 to 2032 and give 600 million euros as “promise to pay”. In addition, the Landesbanken pay 2.6 billion euros into the new pot and are also liable primarily and not on an equal footing with the savings banks if one of the four large Landesbanken gets into trouble. In total, savings banks and Landesbanken must save an additional 5.2 billion in order to strengthen their mutual liability pledges.
The ECB believes that this is urgently needed. The public institutions advertise to their customers that they always support each other. In return for this promise, the banks enjoy certain privileges; For example, they do not have to back up loans with one another with equity. So far, savings banks and Landesbanken have always been able to keep their promises, so they have never let a bank go bankrupt at the expense of their customers. In addition, there are 13 different security systems of the regional associations, the Landesbanken and the Landesbausparkassen, which are linked by a complicated set of rules. Who pays how much in which constellation has to be negotiated first, and if in doubt, that takes a long time. In the end, things always turned out well in an emergency because the financial institutions were able to tap into budget funds from the federal states or municipalities, i.e. taxpayers’ money, if necessary.
Complicated plans for bankruptcies
But didn’t politicians promise after the financial crisis that taxpayers would no longer have to bail out banks? After all, many European countries had borrowed heavily during the crisis in order to save money houses, which they then had to save elsewhere. So today there are complicated plans for bank failures without endangering the whole system. First and foremost, the wealthy owners and creditors should be liable.
At Landesbanken and Sparkassen, however, the situation is more complicated. Their owners are the taxpayers themselves, i.e. municipalities, districts and states. Many politicians there, in turn, take the position that as owners they can inject more money at any time, provided that the parliaments agree. On the other hand, almost everyone in the financial sector agrees that even state banks should not be constantly supported with taxpayer money, but should generate the necessary funds themselves.
The scramble in the Sparkassen-Finanzgruppe is now also about the question of how the burdens are distributed between the federal states and municipalities. Above all, the savings bank associations in North Rhine-Westphalia, Schleswig-Holstein, East Germany and Hamburg no longer have any significant Landesbank investments and therefore do not want to be held responsible for any imbalances in Bavaria, Baden-Württemberg, Hesse or Lower Saxony. Among other things, they had enforced that the Landesbanken would be primarily liable to one another in the future, up to 2.6 billion euros. The savings banks would only have to step in for Landesbanken for larger sums.
The 371 German savings banks, five Landesbanken and the associated fund company Deka and the building societies should now be in a good position to save the additional billions. The banks in the EU member states will have to put money aside for the European deposit insurance scheme for up to four years. That also costs billions, but at least the burdens would be equalized in terms of time: the savings phase for the new fuse box would not begin until 2025.