The Telegraph, Oct 2008
The following article was written by Michael Levitin in Berlin for The Telegraph.
Financial crisis boosts German banks
Germany’s state-owned banks are emerging as winners from the financial tumult that has rocked Europe’s largest economy and its neighbours in the last two weeks.
By Michael Levitin in Berlin – The Telegraph, 13 Oct 2008
Sparkasse savings bank and other state-run banks like it are awash in new business since late September, as Germans rush to deposit money where they perceive it will be safest.
According to a survey conducted by Bild, deposits at Germany’s 16,000 branches of Sparkasse have increased by more than 1bn euros since the financial crisis unfolded two weeks ago. Meanwhile, Haspa, Germany´s biggest savings bank in Hamburg, has recorded fresh deposits of 500m euros.
As Chancellor Angela Merkel prepared to announce a 480bn euro rescue package for German banks with around 80bn in fresh capital and 400bn slated as loan guarantees the trend being seized upon by the average German investor was clear.
“A while ago banks could not be international enough. The only ones that were ‘modern’ were those that were active on international markets,” Michaela Roth, spokesperson for the German Savings Bank Association said.
“But now there is a change in awareness taking place and the image of this very conservative, very solid business model is improving.”
In the bail-out package agreed following an emergency summit of euro zone leaders in Paris, Germany´s Finance Ministry will have the power to extend guarantees totalling 400bn euros through Dec 31, 2009. Since the package assumes 5% of the federal guarantee will be lost, the ministry is authorised to borrow funds at 5 per cent, or about 20bn euros.
In addition, a new state fund billed as the German Financial Market Stabilization Fund will inject 80bn euros into German banks while purchasing their fallen assets.
The Finance Ministry will be able to borrow 70bn euros for that fund about 50 per cent more than the stabilisation fund in London for leading British banks.
More than half of Germans keep their main account with Sparkasse, which specializes in loans to local small and mid-sized firms. The bank, along with regional state-owned Landesbank, is responsible for 43% of all German corporate loans.