Protecting the deposits of Germany's cooperative banks

In addition to the institutional protection that it provides, BVR Institutssicherung GmbH (BVR-ISG) ensures that depositors are compensated in line with legal requirements in the event that a member institution becomes insolvent. If a deposit is not available because a bank affiliated to BVR-ISG is unable to meet its financial obligations, the depositors concerned are compensated by BVR-ISG. The standard maximum amount covered throughout the EU in each case is €100,000 per customer per bank (please see further below in this text for special cases of higher compensation entitlements). This means that this amount is calculated based on the sum total of all deposits held by a single customer at the same bank. If, for example, a depositor holds €90,000 in a savings account and €20,000 in a current account, he or she will receive only €100,000 in compensation.

Joint accounts, professional partnerships, and similar combined entities
This method is also used if a bank operates under several brands. This means that the sum total of all deposits held under one or more of these brands of the same bank is covered for up to €100,000. A limit of €100,000 applies to each depositor in the case of joint accounts. However, deposits held in a single account that can be operated by two or more individuals in their capacity as members of a professional or legal partnership, an association, or a similar combined entity without a legal personality are aggregated for the purpose of calculating the limit of €100,000 and are treated as a deposit held by a single depositor. Compensation is paid automatically based on the bank's available information on the depositor and his or her deposits. Consequently, customers do not need to pursue their claims or provide specific proof of any entitlements. BVR-ISG will reimburse deposits of up to €100,000 within no more than 20 working days. As of June 1, 2016 this period will be reduced to seven working days.

Special cases of higher compensation entitlements
Deposits of more than €100,000 are protected in those cases specified in section 8 (2) to (4) of Germany's deposit insurance legislation (EinSiG). The total amount covered may increase to as much as €500,000 if certain precisely defined conditions are met. The deposits protected in such cases are essentially the following:

• Amounts resulting from real-estate transactions involving privately used residential property;
• Amounts that fulfil social, legally prescribed purposes and are contingent on certain major events in people's lives such as marriage, divorce, retirement, termination or loss of employment, birth, illness, need for nursing care, invalidity, disability, or death;
• Payment of insurance benefits;
• Compensation paid for any damage to health caused by acts of violence or for any damage or loss caused by unjustly suffered criminal prosecution.

In order to be covered by the higher compensation entitlements, the aforementioned deposits must not have been credited to the customer accounts at the relevant bank more than six months before the compensation event occurred. Furthermore, the customer must apply in writing to BVR Institutssicherung GmbH, stating why his or her deposits are covered by the higher compensation entitlements and providing appropriate written evidence. This means that compensation is not automatically paid for deposits of more than €100,000 which are potentially eligible for compensation.

Wording of the legislation



You can find further information here: Federal Ministry of Finance and Federal Financial Supervisory Authority.
 

As a customer of a cooperative bank, you regularly receive information on statutory deposit protection from your institution. It is important to remember that the information sheet for depositors (Informationsbogen für den Einleger) is not being sent because of a change to the existing level of protection or to the resilience of the bank. The reason why you receive the information sheet regularly is that every bank in every member state of the European Union is legally obliged to inform new customers (before any business relationship is established) and existing customers (once a year) about the terms and conditions applicable to statutory deposit protection – including the scope and amount of protection available – by providing them with an information sheet to this effect. The information sheet to be used for this purpose can be found here:

Information sheet (for banks that operate under a single brand)

Information sheet (for banks that operate under several brands)

In the unlikely event that an affiliated bank becomes insolvent, BVR Institutssicherung GmbH will provide information here and by writing to customers about the exact compensation arrangements and procedures in place. Please note that BVR Institutssicherung GmbH cannot provide you with any information about your bank. If you have changed address, have questions about managing your account, or require other information, please contact your cooperative bank directly.

Section 6 of Germany's deposit insurance legislation (EinSiG) states that the following deposits are not eligible for compensation:

1. Deposits that other CRR banks* have invested in their own name and for their own account;
    
2. Own funds within the meaning of Article 4 (1) number 118 of Regulation (EU) no. 575/2013;
    
3. Deposits that have arisen in connection with transactions as a result of which individuals appearing in criminal proceedings have been convicted of money laundering within the meaning of Article 1 (2) of Directive 2005/60/EC of the European Parliament and of the Council of 26 October 2005 on the prevention of the use of the financial system for the purpose of money laundering and terrorist financing (OJ L 309 of 25 November 2005, page 15);
    
4. Deposits of financial institutions within the meaning of Article 4 (1) number 26 of Regulation (EU) no. 575/2013;
    
5. Deposits of investment firms within the meaning of Article 4 (1) number 1 of Directive 2004/39/EC of the European Parliament and of the Council of 21 April 2004 on markets in financial instruments amending Council Directives 85/611/EEC and 93/6/EEC and Directive 2000/12/EC of the European Parliament and of the Council and repealing Council Directive 93/22/EEC (OJ L 145 of 30 April 2004, page 1)
    
6. Deposits that are no longer available and for which the identity of their beneficial owner has never been verified in accordance with Article 9 (1) of Directive 2005/60/EC;
    
7. Deposits of insurance undertakings and reinsurance undertakings within the meaning of Article 13 numbers 1 to 6 of Directive 2009/138/EC of the European Parliament and of the Council of 25 November 2009 on the taking-up and pursuit of the business of Insurance and Reinsurance (Solvency II) (OJ L 335 of 17 December 2009, page 1);
    
8. Deposits of collective investment undertakings within the meaning of Article 4 (1) number 7 of Regulation (EU) no. 575/2013;
    
9. Deposits of pension funds, especially institutions for occupational retirement provision within the meaning of Article 6 (a) of Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provision (OJ L 235 of 23 September 2003, page 10);
    
10. Deposits of government agencies, especially government agencies of the German federal government, of a German federal state, of a legally dependent special asset of the German federal government or of a German federal state, of a German local authority, of another country or a regional government, or of a local authority of another country;
     
11. Bonds issued by a CRR bank* and liabilities resulting from its own bill acceptances and promissory notes.
     

*) CRR banks are deposit-taking credit institutions as specified in the Capital Requirements

BVR Institutssicherung GmbH (BVR-ISG) guarantees the statutory compensation entitlements (depositor compensation) and provides protection for banks. Institutional protection is a form of deposit insurance that enjoys equal status in terms of legal recognition (see sections 43 et seq. of Germany's deposit insurance legislation (EinSiG)). The task of any bank-related protection scheme is to avert or remedy impending or existing financial difficulties at its affiliated banks, i.e. to prevent insolvencies. This involves the restructuring of affiliated banks in financial difficulties in such a way that they are then able to meet their legal obligations in full at all times (see sections 49 et seq. EinSiG).

BVR-ISG also acts preventively to identify any adverse financial trends at cooperative banks as quickly as possible, to provide valuable support to the institutions concerned throughout their financial restructuring and, therefore, ultimately to prevent financial resources from having to be withdrawn from the protection fund. If, however, such funds do have to be utilized in the event of restructuring, the first task is to ensure that the relevant institutions' annual financial statements are able to receive an unqualified auditors' opinion by making the necessary cover funds available. The banks concerned are then financially restructured. The objective here is to prevent banks from becoming insolvent and, consequently, avert the need for depositors to be compensated, thereby also meeting the legal requirements of the EinSiG. This means that the BVR's proven system of institutional protection, which has been in operation for more than 80 years, has not changed at all in terms of its practical impact on cooperative banks' customers. The BVR has merely integrated the system of deposit protection now legally required throughout the EU into the cooperative bank institutional scheme.

The fund set up by BVR Institutssicherung GmbH is financed through contributions paid by the affiliated institutions as stipulated in Germany's deposit protection legislation (EinSiG), which requires that assets amounting to 0.8 percent of the affiliated institutions' covered deposits (deposits of up to €100,000 per customer) be accumulated by 2024.

Because the cooperative member institutions of the BVR have already been paying appropriate contributions to their own institutional protection scheme (namely the BVR institutional protection scheme), the Cooperative Financial Network will have no difficulty in meeting this legal requirement. The cooperative banks also have fund resources and supplementary assets available for further institutional protection measures in case they become necessary.

Customers can obtain confirmation that they are covered by a deposit insurance scheme by asking their bank to provide a certificate documenting its affiliation to BVR Institutssicherung GmbH and its membership of the BVR protection scheme. Customers can also contact BVR Institutssicherung GmbH or the BVR by letter or email and request information to this effect. The information sheet stipulated by section 23a of the German Banking Act (KWG) also provides these details. Bank customers receive this sheet at least once a year and can also obtain it from their bank on request.

BVR Institutssicherung GmbH is a bank-related protection scheme constituted and managed under private law and is officially recognized as a deposit guarantee scheme pursuant to section 43 EinSiG. It operates on the basis of its Articles of Association as amended on January 1, 2024. 

Articles of Association (in german)
 

In common with all banks and deposit protection systems in Europe, BVR Institutssicherung GmbH and the BVR protection scheme are monitored by their national banking regulatory authorities – in this case the Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin) [German Federal Financial Supervisory Authority] in collaboration with Deutsche Bundesbank. They are also obliged to disclose information to European institutions such as the European Central Bank and the European Banking Authority.

BVR Institutssicherung GmbH is a member of the European Forum of Deposit Insurers (EFDI) and consequently has signed up to its multilateral cooperation agreement, which governs collaboration between the deposit guarantee schemes in the event of cross-border payouts to depositors on the basis of article 14 (5) of the European Deposit Guarantee Schemes Directive (DGSD).

EFDI is an international non-profit organization that aims to contribute to financial stability by promoting European collaboration and facilitating dialog on issues relevant to deposit insurance, investor compensation, and crisis management.

www.efdi.eu