Banks don’t go bankrupt every day, but what would that mean for your money if bankruptcy really did occur? Within this framework, your money is protected.
Modern life cannot function without access to the checking account. You will then be unable to pay your rent, get your Netflix subscription or withdraw money from the ATM. Your bank therefore plays an immensely important role. But what happens if the bank itself gets into financial difficulties?
First of all, the good news: If a bank files for bankruptcy, the savings are not lost, because statutory deposit insurance applies at least up to a certain amount. Every customer gets their credit refunded up to a certain maximum amount. But you should know the details and possible pitfalls.
This applies to deposit insurance
In Germany, at least 100,000 euros per customer and bank are protected by statutory deposit insurance. It is important to read this carefully, it does not explicitly say per customer and account. The balance of several accounts at one bank is added together. On the other hand, if you have multiple accounts at different banks, protection per bank applies.
Important: Some banks use common licenses or have sub-brands at the start. For example, Deutsche Bank and Postbank belong together. Anyone who has an account there only has a total of 100,000 euros in protection.
For joint accounts, for example for married couples, the deposit protection increases to 200,000 euros. Under certain conditions, deposits are legally protected for a period of six months up to a maximum of 500,000 euros, for example if you have just sold your house and therefore have significantly more money in the account than usual.
Other security systems
Private banks must be members of the German banks’ compensation scheme. In addition, most private banks in Germany belong to the voluntary deposit protection fund of the Federal Association of German Banks.
In this case, the scope of security, including legal protection, is at least 437,500 euros. However, it depends on the bank’s equity capital, so the protection amount can also be higher; currently it is a maximum of 3 million euros for private savers.
There is also a security facility of the Federal Association of German Volksbanks and Raiffeisenbanks, the security system of the German Savings Banks and Giro Association and the deposit protection fund of the Federal Association of German Public Banks.
The BaFin account comparison shows for every current account in Germany whether a voluntary security system would also apply in addition to the statutory deposit protection.
This is what deposit insurance applies to
The protection of deposit insurance includes balances in current and current accounts, fixed-term deposits, savings accounts and savings certificates. Uninsured financial products include equity-like deposits such as participation certificates. The same applies to cryptocurrencies such as Bitcoin or other digital assets.
Securities in the custody account such as shares, funds or certificates are also not protected by statutory deposit insurance. However, the portfolio assets are fundamentally the property of the investor. They are therefore not affected by a bank failure. Customers can therefore easily transfer securities to another depot. However, the deposit protection applies to the clearing account linked to the securities account.
Tips for greater wealth
If you have larger amounts of money, you should spread them across several banks so that the expected interest does not exceed 100,000 euros per bank.
Important: Statutory deposit insurance does not only exist in Germany. It applies to the entire euro area. What is important, however, is that the responsible foreign security system can also provide assistance.
From the point of view of consumer advice centers, money should only be invested in banks in financially strong countries. These can be recognized in interest portals by the credit ratings that rating agencies assign. The grade should not be below AA or Aa2.
No more account access possible
If a bank goes bankrupt and the Federal Financial Supervisory Authority (BaFin) determines that there is a need for compensation, the deposit protection system automatically starts the compensation process. Customers do not have to take any action, at least in this area. A statutory refund period of 7 days applies here.
However, you should know that if BaFin intervenes, your account will be blocked. It is therefore no longer possible to access the account balance. And that’s why customers have to take action because those affected should take care of a new account immediately.
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