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Tuesday, September 18, 2007

Are German banks safe?

No doubt you've seen the pictures of savers queuing outside the British Northern Rock bank, anxious to protect their savings from the vagaries of the international finance markets. If you've got some Euros stashed away in one of the many German banks, you may be asking yourself right now whether it'd be worth making an Überweisung (bank transfer) directly to the underside of your mattress.

The short answer is: no, your savings are safe. Virtually all banks in Germany participate in some form of Einlagensicherungsfonds, a kind of insurance facility which guarantees the deposits of an individual savers up to a sum corresponding to 30% of the bank's capital. That means even deposits going into the millions of Euros are safe.

This system of deposit insurance was introduced during the 1970s following the spectacular collapse of a large Cologne-based bank, the Herstatt-Bank. Not that some banks, particularly specialist "private banks" and some foreign banks operating in Germany but without a company presence are not part of any deposit insurance system; in such cases there's a state-backed guarantee (gesetzliche Entschädigung), although this only covers 90% of deposits up to a maximum of €20,000.

For more information on Einlagensicherung see the this page (in German) on the website of the Bankenverband (Federation of German Banks): Einlagensicherung.

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