Deposit Guarantee Schemes

Deposit Guarantee Schemes concerning Foreign Banks

 

For private banks in Germany (i.e. institutions which are neither savings banks nor cooperative banks), a statutory and a voluntary deposit guarantee scheme co-exist. Hereinafter, we describe the protection of deposits by the following organisations:

  1. The statutory deposit guarantee scheme run by the EdB (deposit protection scheme of German banks – “EdB compensation scheme”) and
  2. The additional voluntary private guarantee scheme “Deposit Protection Fund“ of the Association of German Banks (BdB).


The statutory deposit guarantee scheme

The statutory deposit guarantee scheme is set up and regulated under the German Deposit Guarantee Act (EinSiG) and the Investor Compensation Act (AnlEntG). The German Deposit Guarantee Act applies to all the banks incorporated in Germany, including subsidiaries of foreign banks. Pursuant to this Act, deposits of retail clients, partnerships and corporations are guaranteed up to the amount of € 100,000 per depositor. Deposits held in Euro or other currencies are eligible for this scheme.

As well as German banks, German branches of foreign banks domiciled outside of the European Economic Area (EEA[1]) are subject to the German statutory deposit protection. As a consequence, deposits up to the amount of € 100,000 are protected.

German branches of European banks domiciled in the EEA do not come under the German statutory deposit protection, but under the scheme established in their home country. Nevertheless, because of harmonised European law, their home country protection is as high as in Germany, namely € 100.000. Therefore, as a general rule, clients of German branches of European banks benefit from the same protection than clients of German banks.

Besides, the German Banking Act requires every foreign bank in Germany, irrespective of whether it is a branch or subsidiary, to inform its clients about the guarantee scheme it belongs to by an information sheet and a respective reference on account statements.

 

The voluntary deposit guarantee scheme

In addition to the statutory deposit guarantee scheme, German banks as well as subsidiaries and branches of foreign banks in Germany may participate in the voluntary private Deposit Protection Fund of the BdB.[2] Most foreign banks in Germany taking deposits are indeed members of the German voluntary Deposit Protection Fund.

The Deposit Protection Fund is a second line of defense in addition to the statutory deposit protection schemes. Deposits which are not compensated by the statutory scheme in Germany or – in the case of branches of European banks – deposits exceeding the coverage level of the statutory scheme of the respective European home Member State are protected up to the coverage level of the voluntary Deposit Protection Fund. This coverage level is significantly higher than the one offered by the statutory schemes, because it protects depositors up to the amount of 20 % of the relevant liable equity capital of the respective bank.[3] The scope of protection covers deposits of retail clients, corporations and public entities.

The mentioned coverage level of 20 % will be gradually decreased according to a resolution of the Deposit Protection Fund:

  • From 1 January 2020 on decrease of the coverage level to 15 %
  • From 1 January 2025 on decrease of the coverage level to 8,75 %.



[1] Member States of the EEA are all 27 Member States of the European Union as well as Liechtenstein, Iceland and Norway.

[2] A list of members is available at www.bankenverband.de/einlagensicherung.

[3] BdB informs about the respective coverage levels on its website.