In case you thought that the FDIC and all the other such schemes would make your bank safe, you need to seriously reconsider your position and read the fine print of your insurance policies. If you didn't think it in the first place, this report will prove that you were right not to trust the government to save your savings...
The timelines are far ahead, but one can see already that only 100k€ are guaranteed. Which will obviously seem a lot to some, but very little to some others.
No wonder that people will withdraw their deposits and maybe even load up on Gold and Silver, which unfortunately, will be the wrong reaction in a credit implosion and cash shortage environment. The reason is simple: if you owe some institutions Euros, you'd have to sell your gold first, and then obtain euros. So this selling will provoke a drop in the value of gold, and the transaction costs will also impact negatively the amount of Euros you will receive.
Here's the report from the WSJ.
(Dow Jones)--Germany's commercial banks are proposing changes to the sector's voluntary deposit-guarantee fund that would result in a lower proportion of customers' deposits being protected if their bank fails than at present.
Currently, the voluntary fund set up by commercial banks guarantees customer deposits of its members by up to 30% of a bank's equity capital for each customer.
The BdB banking association, which represents banks including Deutsche Bank AG (DB) and Commerzbank AG (CBK.XE) and has 173 members, Thursday said it is proposing to lower the fund's guarantee to a maximum of 8.75% of equity capital for each customer by Jan. 1, 2025.
Under the proposal, on which BdB members will vote at a meeting on Oct. 17, the reduction will take place in three steps: the guarantee will drop to 20% on Jan. 1, 2015, then to 15% on Jan. 1, 2020, and to 8.75% on Jan. 1, 2025.
In Germany, there are two types of deposit guarantees. One is a legal guarantee of up to EUR100,000 for retail customers' bank deposits. In addition, each banking sector--commercial banks, savings banks, building societies and cooperative banks--has its own voluntary deposit-guarantee fund, known as Einlagensicherungsfonds.
Germany's commercial banks have been discussing reforming their voluntary deposit-guarantee scheme since the collapse of Lehman Bros.'s German arm led to the fund's capacity being exceeded. A broad banking crisis would also exceed the fund's capacity.
The Bdb said deposit protection for private and institutional customers will still remain high, even under the proposal.
For instance, EUR1.5 billion in guaranteed deposits would become EUR437,500 under the new rules, said Hans-Joachim Massenberg, a member of the BdB's board of managing directors. That is still four times higher than the EUR100,000 in retail deposits guaranteed by law and means that even higher retail deposits, such as from a property sale or the payout of a life insurance policy, would still be protected in their entirety under the new scheme, he said.
He noted that even after 2025, more than one third of Germany's commercial banks will be able to offer deposit protection of above EUR25 million, so that even institutional customers such as municipalities and pension funds will still be able to deposit funds within the boundaries of the new framework.
Commerzbank Chief Financial Officer Eric Strutz Thursday downplayed the impact of the proposed change. Under future capital requirements, banks will have to hold much more equity capital than in the past, when the fund was set up, so the effect of the lower guarantee will be very limited, Strutz told reporters on the sidelines of a banking conference.
Germany's cooperative banks said they will stick to the current 100% guarantee for customer deposits.