Deposit insurance: mail from the bank.

These days, many customers of banks and savings banks receive mail from their financial institution. In it, customers are informed about the changeover of the so-called deposit protection scheme. With many receivers this releases an uneasy feeling and so some asks itself seriously the question: How safe is our money with bank?

This question is not unjustified, because our money is not as safe as many people believe. There are the respective security systems of the private banks and the savings banks and people's banks, but they function only as long as it does not come to a domino effect. As long as only one member institution gets into difficulties, all the others together are able to absorb this and guarantee the deposits of the customers up to an amount of 100.000 euros, even if there is no legal claim to this for the individual. But if several banks or savings banks are hit at the same time, even the promised security collapses like a house of cards.

Many people first became aware that this was the case when the financial crisis was at its peak. At that time the worst case could have actually happened and the money of the savers would have been gone in one fell swoop. Against this backdrop, some German savers started to withdraw their money from their accounts. This is particularly noticeable when a lot of large bills suddenly wander over the counter of the financial institutions.
Chancellor Merkel and her finance minister at that time Steinbrück became already nervous and decided for a daring way. They promised the people simply before running camera that “their savings deposits were safe”.

There was no legal basis for this. Merkel and Steinbrück knew that, but not the savers. They believed in the promise of security and the feared bank run failed to materialize. A daring step, the system could be saved once again.

Deposit guarantee

Now the system of deposit insurance is changed. This is what the numerous letters that are currently going out to savers are informing them about. In the future, the state is to be completely excluded from the protection of the deposits of savers, even theoretically.

The security of savings banks and people's banks among themselves will remain. However, there is now to be a legal entitlement to compensation of up to 100.000 euros in the event of a claim. In special cases, this limit can even be as high as 500.000 euros, for example if you have just sold a property. Then the deposit is safe for 6 months up to half a million euros.

The private banks also continue to guarantee deposits of up to 100.000 euros. In addition, the members of the Association of German Banks (BdB) also protect higher deposits via a deposit protection fund, even in the future. However, the level of protection will change. Until now, deposits were protected up to 30 percent of the liable equity capital of the respective bank. In the future, this limit will be lowered to 20 percent. From 2020, only 15 percent, which corresponds to a coverage of 750 percent, will be available.000 euros per bank customer. For private savers usually no problem, but for companies certainly.

Bail-in

What sounds more or less rosy up to now, has however still another crucial hook. As of 01.01.In 2023, the so-called bail-in regulation will come into force. In the event of a bank failure, this provides for the participation of creditors and savers with deposits in excess of 100.000 euros before. D.h. nothing else than that in case of bank failure all money over 100.000 euros for them savers is gone.

The deposit guarantee systems of the savings banks still exist & Volksbanks and the private banks among themselves in each case. But even these only work as long as only one financial institution is affected. If several banks and savings banks collapse, the money is also gone here. It is not planned that the state will step in in such a case. There is only the legal right to compensation up to an amount of 100.000 euros per saver. More not. Merkel could promise the blue of the sky down again in the case of the cases, at this fact nothing would change.

So is our money still safe?

For small savers who have less than 100.If the majority of savers have more than EUR 000 in their accounts, this question could be answered in the affirmative. Leaving aside the fundamental weaknesses in the construction of the common currency, the euro, and the creeping devaluation of money, the situation is very different.
People who have more money than this limit should, however, give serious thought to ways of safeguarding their assets.