There is no getting around the stock exchange you have to pay yet? The negative interest rates hit more and more bank customers. The “credit fees” apply to lower account balances. The process is accelerating, and there is no end in sight. Gone are the days when savers earned risk-free four percent interest on overnight money accounts or federal bonds. The negative interest rates of the European Central Bank (ECB) are putting the banks under pressure. German institutes had to pay 2.7 billion euros to the ECB for this last year. They now pass these costs on to the customers. Savers who want to avoid negative interest rates have to take risks, especially when rising inflation devalues ​​their savings.

Fortunately, German savers have overcome their fear of stocks. You have never invested so much in stocks in this country as in the pandemic year 2020. In the long term, stocks generate the highest returns, as many studies show. However, this assumes that the saver chooses the right securities. The Wirecard debacle shows the investment risks of individual stocks. They can be reduced with a cheap passive index fund (ETF). Investors spread their risks because they buy a broad stock index such as the Dax.

Old wisdom no longer applies

But even then there are risks. In the past, savers over the age of 50 were advised to switch more and more from stocks to interest-bearing stocks. Then they would be on the safe side in retirement because the recovery after stock market corrections could take several years – often too long for retirees who are dependent on their reserves. However, dangers lurk even with supposedly safe investments, as the imbalance of Greensill Bank has just made clear.

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The private investors have been paid off in full by the deposit insurance of the private banks, but municipalities and other professional investors got away with nothing. You lost 500 million euros at the German subsidiary of the Australian supply chain financier. Negative interest rates are pushing municipalities to risky investments, and taxpayers suffer from the losses. The deposit insurance of the private banks, which is mainly borne by Deutsche Bank and Commerzbank, is now even planning to cut its performance promises even further.

In the next case of damage, even fewer investors are likely to hope for their money, and the victims could also include companies and municipal utilities. For some time now, specialized interest-rate platforms, such as Weltsparen or Zinspilot, have played an important role in brokering deposits. They also brokered deposits at Greensill. Your business model is based on the statutory deposit guarantee of 100,000 euros per customer and bank. Without this guarantee, no saver entrusts his money to an unknown bank for overnight interest rates of 0.2 percent.

Risk of misallocation

However, such institutions usually have higher risks than the banks, which are currently fending off deposits with negative interest rates. The Greensill imbalance stands for the risk of misallocation: banks with risky business models can finance themselves at historically low interest rates through deposits because savers rely on the statutory default guarantee. This costs the private banks one billion euros, plus a further two billion euros from voluntary deposit protection, i.e. for deposits above the statutory guarantee.

The banks would have better invested the money in digitization. It is understandable that they now want to reduce the scope of their voluntary deposit insurance. In the banks, the willingness to show solidarity with dubious competitors who belong to their security system has also been damaged. Volksbanks and savings banks, on the other hand, continue to promise full deposit protection, because each member institution in their association is caught by the others in the event of an imbalance. But the network structures are a thorn in the side of the ECB’s banking supervisors. The savings banks’ security system must therefore be reorganized; to the ECB it seems too complex and not efficient enough.

Less security for German savers

At the same time, the central bank is pushing for a European deposit guarantee. However, it would not offer German savers any more security because banks from Italy or Greece also have to be protected. So far, the German government has firmly insisted that the bad loans in southern Europe would have to be dismantled beforehand. But how long? As with the joint EU bonds, it is only a matter of time before the stance of refusal is given up. However, savers should not use a European deposit insurance as an opportunity to put their money under their pillows. Better to learn now to deal with the risks of the stock exchanges.


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