Statement by the Association of German Banks in response to the current speculation about its Deposit Protection Fund

17 September 2008 - Current press reports have created a false picture of the strength of the Deposit Protection Fund run by the Association of German Banks. The Deposit Protection Fund is by no means in trouble. Just as it has done during the past thirty years, it will continue to provide compensation to depositors for protected deposits when required.

Reports in the press equating the amount of the protected deposits with the loss borne by the Deposit Protection Fund are wrong. If BaFin, the federal financial regulator, finds that compensation is payable, the Deposit Protection Fund compensates depositors for the protected deposits. When the insolvent bank’s assets are subsequently realised, it can as rule recover the lion’s share of the liquidity provided to compensate depositors. Because of the high recovery rate, the loss ultimately borne by the Deposit Protection Fund is therefore much lower than the amount of the protected deposits.

In the case of Lehman Brothers Bankhaus AG, BaFin imposed a moratorium on the bank, thus closing its counters, on 15 September 2008. Securities accounts are not covered by the moratorium. Customers may continue to use these accounts, provided the bank has no liens on them. BaFin has not yet made any decision on whether compensation is actually payable. Customer deposits, including registered savings certificates, are protected up to a ceiling of € 285,105,000 per depositor.

The Deposit Protection Fund of the German Private Commercial Banks