Consequences of the bank failures: “Investors do not have to fear for their money”


Status: 03/24/2023 5:26 p.m

After the bank failures in the USA and Switzerland, many people are unsettled. Now bank stocks have slumped again. In an interview, investment professional Christian Kahler explains what savers and small investors should consider. Mr. Kahler, given the recent turbulence in the banking sector, do savers have to worry about their savings?

Christian Kahler: My opinion is: no. We are seeing a market shakeout that is part and parcel of the capitalist system. Weak banks – in this case the Silicon Valley Bank in the USA and also Credit Suisse in Switzerland – have made mistakes, sometimes serious mistakes, and have done so for many years. I don’t see a systemic crisis looming and investors having to fear for their money.

To person

Christian Kahler worked for DZ-Bank, the central bank of the Volks- und Raiffeisenbanken, for more than 20 years, the last ten years as chief investment strategist. Nine months ago he founded his own investment company together with a partner: “Kahler & Kurz Capital”. Among other things, he sets up his own public fund there, which, according to his own information, only invests in a few quality companies.

National and EU-wide deposit insurance How safe is the savings that are in a German bank or savings bank on the current account?

Bald: Customer deposits are protected by law. That means fixed deposits and savings deposits. The Deposit Guarantee Act has existed since the 1970s, and as a result, German banks, savings banks and cooperative banks are obliged to protect customers’ deposits. (Editor’s note: Since 2015, this has applied to bank balances of up to EUR 100,000 per investor and institution) And I can’t remember that in the past 40, 50 years the big financial institutions have used it once. Keyword: deposit insurance: What about non-European banks? Is your own money just as safe there as in a German bank or savings bank?

Bald: This is an EU-wide law. That means money is just as safe in the banks of countries in the eurozone as it is here. (Editor’s note: The consumer portal Finanztip only recommends banks that belong to the statutory deposit insurance in an economically strong European country.)

“Crises are part of everyday stock market life” In view of the high inflation and, in relation to this, very meager interest rates on the call money account, it is already worthless to simply leave the savings in the account. Many Germans continue to do so. But more and more people are also discovering shares, especially share savings plans, for themselves. What should retail investors be aware of in light of the recent turmoil?

Bald: I generally recommend an installment savings plan – i.e. save a certain amount monthly or quarterly and thus approach the topic. Experience has shown that you then have a very good chance of things going well in the long term. From my experience, it sometimes makes sense to act against your own maxim in a crisis and then maybe save a little more than you could. What I advise against, however, is if someone has inherited or received money as a gift, to invest everything at once. That’s not a good idea. It is better to invest the sum over half a year or over a year. As an investment professional, what advice do you have on how to deal with crises like these?

Bald: Crises are part of everyday stock market life. As an investor, you are well served by continuously ignoring this. And besides diversifying your investment, it’s always advised to have a long-term investment horizon, right?

Bald: If I’m active on the stock exchange, I would always say: calculate at least seven, ten years. Gladly much more. Stock portfolios, ETF and other funds are not protected by deposit insurance. What happens if the bank or institute where I have my fund savings plan goes bankrupt or is taken over?

Bald: The good news is that the money is still there. Because: If I keep money in the form of a fund at a bank, it is a so-called special fund. That is, that is separated from the capital of the bank. That’s why it’s also called a special fund, it’s just with a neutral depositary. And I’ll say as an example, if my local bank goes bankrupt and I have an equity fund there, then I don’t have to worry about the money being gone or being confiscated in any way. That’s for sure.

Similar symptoms but different causes Despite the rollercoaster ride on the financial markets, your ex-colleagues from DZ-Bank see the DAX at 16,000 points by the end of the year. Do you share this view and if so, why don’t you expect a slump?

Bald: I stay out of these forecasts because it’s just incredibly difficult. You don’t even know where the DAX will be at the beginning of next week. We have had very bad news and very bad market sentiment for several months now. But we know from experience that things will get better again. And if you get involved in the stock market in times of crisis or recession, you actually always make a very good average in the long term, and that’s why I share the optimism that in a year’s time the DAX might even be higher than it is today. As a general question, you as a long-standing industry expert: are we experiencing the beginning of a banking crisis, or is it individual institutions that are stumbling?

Bald: We are now seeing symptoms that are similar to those of the Lehman Brothers crisis in 2008/2009, but the causes are completely different than they were then. We have seen significant problems at Credit Suisse in recent years, where this self-service mentality has also contributed to things getting worse. And Silicon Valley Bank is also a special case. I don’t think there will be a global banking crisis or domino effects. But you also have to be clear that the topic will not be off the table next week. We are currently seeing that bank stocks are collapsing again just before the weekend, especially those of Deutsche Bank. And the costs of so-called credit default swaps, i.e. credit default insurance that protect holders of Deutsche Bank bonds against possible credit defaults, have risen. How do you explain that?

Bald: The market is nervous. Investors now fear that there are more “rotten eggs” among the banks and that there is a risk of contagion. Money will certainly be withdrawn from one or the other bank. And many professional investors are now trying to reduce this risk by hedging themselves.

The interview was conducted by Bianca von der Au,

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