Deposit guarantee: German banks to set a ceiling soon

German commercial banks will soon be putting an end to a system introduced in the 1970s. The deposit guarantee fund, which provided almost unlimited coverage for savers, will be capped from 2023.

An unlimited deposit guarantee introduced in the 1970s

While all European commercial banks are obliged to protect their customers' deposits up to a minimum of 100,000 euros, German private banks used to go much further. In fact, savers' deposits were covered up to several hundred million euros.

While this virtually unlimited protection has delighted the wealthiest customers of German commercial banks since the 1970s, it has not been the case for other European banks, which have criticized it as an obstacle to competition.

The Federation of German Private Banks (BdB) had already decided to reform this system, called "Einlagensicherungsfonds" in German. Following the collapse of Lehman Brothers in 2008, and then of the German subsidiary of Mapple Bank in 2016, guaranteed deposits were no longer to exceed the ceiling of 8.75% of the bank's equity capital by 2025.

Gradually lower ceilings from 2023 onwards

But after the bankruptcy of reverse factoring fintech Greensill in March 2020, the Federation of German Private Banks, which had to fork out €3 billion for the occasion, decided to take its deposit guarantee reform a step further.

As announced on December 8,the deposit guarantee will be capped at 5 million euros per bank from 2023. This ceiling will then be progressively lowered: it will drop to 3 million euros in 2025, and will be limited to 1 million euros in 2030. These amounts apply to individuals, charities and foundations.

For corporate deposits, the guaranteed amount per bank will be 50 million euros in 2023, 30 million euros in 2025 and 10 million euros in 2030. Amounts deposited abroad in branches will no longer be covered by the deposit guarantee fund.

In addition, from 2023, investment companies, public authorities, insurance companies and other professional depositors will no longer be eligible for the deposit guarantee.

Christian Sewing, Managing Director of Deutsche Bank and Chairman of the Federation of German Private Banks, assured us that the reform would only affect 2% of German commercial bank customers.