Why should you care about deposit guarantee insurance while opening a bank account in Germany?
Banks have gone insolvent in the past and specially after the financial collapse in 2009 and the troubled Euro Banks, one must always consider how safe your money is and in case of insolvency whether a deposit guarantee is provided and if so how much.
The deposit guarantee is a customer’s protection in case the bank goes insolvent. Depending on the security provided by the bank, your money can be recovered either partially or in complete.
Legal framework for bank deposit guarantee in Germany.
In accordance with the EU directive 1998, Germany has adopted a Deposit Guarantee and Investor Compensation act (Einlagensicherungs- und Anlegerentschädigungsgesetz). Accordingly, German banks have to voluntarily deposit into a deposit insurance fund (Einlagensicherungsfonds). In case of bankruptcy, compensation is made from the deposit made by the bank. However not all banks in Germany are part of the deposit insurance fund such as foreign banks. The list of banks taking part deposit insurance fund can be checked out line from the Association of German banks website.
Banks however can guarantee additional deposit insurance by voluntarily paying additional funds into a deposit insurance fund (Bundesverband privater Banken eV) Some banks even guarantee 100% of the deposit to the bank customers to prove their credit worthiness and improve them credit ratings.
How much of bank deposit is guaranteed in Germany
According to the 1998 act upto 90% of deposit to a maximum of € 20,000 was compensated. This was then increased 100% compensation up to a sum of € 50,000.
As of January 2011, a 100% compensation of bank deposit up to a maximum of € 100,000 for investor.
The German Federal government has already given an unlimited government guarantee on the bank deposit; however this might not be a statutory warranty.