The Volks- und Raiffeisenbanken have voted for a reform of their security system. This should not increase the total payments.
(Photo: imago images/Michael Gstettenbauer)
Frankfurt The German Volks- und Raiffeisenbanken are adapting parts of their security system, which the financial institutions use to help each other in an emergency. They want to use this to identify and counteract problems at individual cooperative banks as early as possible. On Thursday, more than 95 percent of the approximately 740 cooperative financial institutions voted for the changes to their joint institutional security, according to their central association BVR.
In this way, the protection scheme should be able to better distinguish between high-risk and low-risk banks. For most member banks, the contribution they have to pay for the guarantee system will not change.
Specifically, the members voted, among other things, for the confidentiality obligation associated with audits to apply not only to the guarantee scheme, the supervisory authority and the respective auditing association, but also in principle to the bank concerned itself.
All customer deposits are protected
In addition, if a bank violates certain obligations, the protection scheme can temporarily demand higher contributions from the bank. So far, in the event of a breach of duty, the only option was to immediately exclude a bank from the community of solidarity. “Prevention is the most effective tool of the solidarity community of the cooperative financial group,” explained the BVR.
The protection scheme protects all customer deposits, including savings deposits, savings certificates and sight deposits, and is therefore fundamental to the self-image of the cooperative banks. In addition to the Volksbanks and Raiffeisenbanks, they also include the Sparda banks, the PSD banks and a number of specialist institutes.
The general protection works by preventing bank insolvencies. In the event of an emergency, a bank that is in difficulty receives help from the guarantee system so that it can meet all its obligations. The Savings Banks Finance Group, the largest competitor of the cooperative banks and market leader in business with private customers, also relies on institutional security.
BVR board member Daniel Quinten pointed out that parts of the system have not been changed for years. The reasons for the changes include new regulations for banks. Some of the announced changes can be interpreted to mean that the BVR wants to monitor member banks whose business models differ significantly from the sector average more closely.
One of the unusual financial institutions is the VR-Bank Bad Salzungen Schmalkalden, which made headlines with football financing. Since 2004, the contributions that individual banks have to pay have been graded according to their risks.
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