German investors flee to Sparkasse safety

Germans are moving their nest eggs to the safety of state-owned banks, despite Chancellor Angela Merkel's pledge this week to guarantee all savings and current accounts.

German investors flee to Sparkasse safety
Safer Photo:DPA

In the past two weeks alone, Germans have put more than one billion euros into accounts at the country’s massive network of Sparkasse savings banks, according to a survey by the Bild newspaper on Friday.

“A while ago banks could not be international enough and the only ones that were ‘modern’ were those that were active on international markets,” said Michaela Roth, spokeswoman for the German Sparkasse federation DSGV.

“But now there is quite clearly a change in awareness taking place and the image of this very conservative, very solid business model is improving,” Roth told AFP.

Merkel issued the blanket deposit guarantee on Sunday in an effort to stave off panic withdrawals after Berlin cobbled together a 50-billion-euro rescue of the country’s fourth biggest bank, Hypo Real Estate (HRE).

But although there have been no massive queues outside German banks, it is clear that the country’s citizens are far from reassured: a survey published on Thursday said that just 55 percent of Germans feel their savings are safe.

So despite Merkel’s assurances, which are not underpinned by legislation, Germans are taking no chances and are moving their money en masse to banks where they feel more confident that it won’t disappear into thin air.

That place is the good old Sparkasse, the bank on every German high street owned by cities, local towns and communes, which was dismissed in recent years for the lacking financial wizardry needed by banks in the 21st century.

A spokesman for Haspa, Hamburg’s savings bank and Germany’s biggest, told AFP that since late September, when the financial crisis snowballed after the collapse of Lehman Brothers, customers have deposited 500 million euros in its branches.

“It is definitely a significant rise that we are registering. We are also noticing it with the numbers of actual customers … Just in the last week we have gained 500 extra (customers),” Haspa spokesman Andre Grunert said.

Roth from the DSGV said that some of the federation’s members had reported more deposits but cautioned that “this should not be interpreted as a general trend.”

However the association was noticing that people were being increasingly attracted by the Sparkassen business model – investing the deposits that individuals make in the form of loans to local small and mid-sized firms, spokeswoman Michaela Roth told AFP.

Sparkassen have long dominated high street banking in Europe’s biggest economy, with more than half of Germans holding their main account at one of the country’s 16,000 branches.

The German economy is also heavily dependent on them for lending, with 43 percent of all German corporate loans granted by a Sparkasse or a regional state-owned Landesbank, Roth said.

The Sparkasse in the western city of Duesseldorf has brought out a new hard-hitting advert with a picture of a bench (which in German is the same word as for bank) missing the wooden slats to sit on.

“Has your bank gone? Then just come and see us!” the ad says.


German watchdog steps up monitoring of popular N26 online bank

Germany's financial watchdog on Wednesday ordered online bank N26 to step up "internal controls and safeguards" to prevent money laundering and terrorist financing, and said it was appointing a special representative to monitor progress.

German watchdog steps up monitoring of popular N26 online bank
An N26 card. Photo: Wikimedia Commons

Bafin’s announcement marks an escalation of previous warnings to the popular Berlin start-up, which has come under fire in the past for not properly verifying the identities of new customers.

“Bafin ordered N26 Bank GmbH to rectify deficiencies both in IT monitoring and in customer due diligence,” the regulator said in a statement.

N26 “is required to ensure that it has the adequate personnel, technical and organisational resources to comply with its obligations under anti-money laundering law,” it said.

A “special commissioner” would oversee the company’s efforts, Bafin added. Founded in 2013 and known for its transparent debit cards, digital bank N26 is one of Germany’s most high-profile financial technology or “fintech” firms and now has seven million customers in 25 countries.

Its rapid growth has rested in part on fast-track identity procedures for new customers.

READ ALSO: What is the digital German bank N26 that’s about to hit a million users?

In 2019, German business weekly WirtschaftsWoche said it had managed to open accounts using forged IDs.

N26 on Wednesday pledged to “work closely” with Bafin and the special representative.

It said it had already significantly increased measures to prevent money laundering in recent years, “but we recognise that more must be done in this area”.

The coronavirus crisis had contributed to a spike in fraudulent online transactions worldwide, N26 added, “increasing the demands placed on banks in the fight against crime”.