Deposit insurance Germany
institutions are for the most part government run or established, and
may or may not be a part of a country’s central bank, while some are
private entities with government backing or completely private entities.
There are a number of countries with more than one deposit insurance
system in operation including Austria, Canada (Ontario & Quebec),
Germany, Italy, and the United States.
On the other hand, one deposit insurance system can cover more than one
country: the Marshall Islands, the Federated States of Micronesia, and
Puerto Rico are insured by the US Federal Deposit Insurance Corporation.
Cameroon, the Central African Republic, Chad, Congo, Equatorial Guinea,
and Gabon will also be covered by a single system.
Einlagensicherungsfonds is the German bank deposit insurance
scheme maintained by the Bankenverband. The statutes are
quite interesting. §6 (10) on p.12 concerns ordinary clients
of failed banks in Germany, like those of Lehman Brothers in
10. Ein Rechtsanspruch auf ein Eingreifen oder auf
Leistungen des Einlagensicherungsfonds besteht nicht.
This says there is no legal title on the bank deposit
insurance. This has always seemed to be a minor point, since
German banks have been safe and secure places in the last 50
years. But, with the US banking system failing, should we
reevaluate this minor point?
The answer is certainly yes. Financial markets are global,
and the failure of IKB showed how banks and financial
markets are interdependent. A lot of German (and European)
banks have lost money in the US financial crisis. The banks
themselves seem to be irritated, so irritated that they
report the rate at which they lend money to each other (the
LIBOR, see my last post). There seems to be a certain level
of stress in the system, and the ECB has injected liquidity
into the system more than once in the last months. Since the
banks don’t seem to trust each other with the LIBOR , plus
the LIBOR itself is already quite high (see below), it is
difficult to make anything more than an informed guess. I am
not doing that, but I want to point out that the
Einlagensicherungsfonds will only fail if the big German
banks break down together. That would still leave room for a
bail-out by the government, but hopefully we will not have
to think about this.
UPDATE 07/10/2008: The German government guarantees for all
money in the banks. Ireland did the same, but that only
makes two ridiculous proposals. The government does not have
the money to fulfill its promise. This kind of policy-making
is potentially damaging. Coordinated action is needed.