Deposit insurance and guarantees at banks, government bonds and insurance companies worthless?

All guarantees, in whose security one lulls oneself, have no absolute value. After all, the decisive factors are the conditions and the legal framework for this, political legal certainty and the economic default risk of the guarantor.


Guarantee certificates

Looking for “total return investments” where you end up getting 100% of your investment back means having to read 40-800 pages of offering terms, which virtually no advisor has done before selling. Only at the end of the running time the investor rubs the eyes, if apart from the income tax also still up to more than 8% selling and current administrative expenses on the repayment result and the Investment brought from the outset after its contents nearly safe losses. By guarantee the investor had understood something else.


Guaranteed good ranking marketing by asset managers.

Year after year, bankers have themselves chosen as the best asset managers. Only a precise analysis of the conditions and business models allows us to guess where there is more appearance than reality behind it. The trade press lets itself pay for the ranking and or indirectly through the purchase of offprints or advertisements – a guaranteed common procedure, and not an isolated case. The ease with which the reader is guaranteed a carefree choice of bank or asset manager later proves to be a mistake, as soon as one or two dubious scents come to light.


Guaranteedtoo little equity.

Allegedly for reasons of competition, solvency rules have been relaxed and a necessary tightening has been suspended by the EU.

Thus, the customer bears the risk that his bank will not be able to offset risks incurred in the form of speculative losses from its own resources. The possibility of transforming from a bank into a casino had become possible in mid-2002 as a result of the “Act on the Further Development of Germany as a Financial Centre” (BGH, judgment of 15.01.2013, ref. 11 ZR 90/11).


Private bank deposit insuranceken guaranteed without value.

In the aftermath of the bankruptcy of the German subsidiary of Lehman Brothers Bank, the Berlin Regional Court (Case No. 10 0 360/09) stated in its ruling of 15 June 2010 that “bank customers are in principle not legally entitled to benefits from the deposit protection fund of private banks.” To the extent that the statutory deposit protection fund has kicked in, the case of “Phoenix Kapitaldienst GmbH” shows that the settlement can practically drag on for years – without reimbursement of lost interest, declared fictitious profits and out-of-court costs. The good intention of the legislator says that since mid-2009 the payout has been limited to 30 days. It is guaranteed that no banking association will provide information on where the so-called guarantee fund is located, how much money is involved and how it is currently invested.

Guaranteed no guarantor liability or institutional liability.

Particularly in the area of savings banks, the state has no longer guaranteed sufficient equity capital for years. Voluntary mutual liability within this banking group also improves the chances of not being affected by insolvencies, because if necessary, one ailing institution is merged with another for resolution. “German savers have nothing to worry about,” assured a savings bank president. It’s kind of like the seriously ill patient going to the doctor and saying “Didn’t you say 12 months ago that I didn’t have to worry about my health?” – to which the doctor replies, “Well, that was true then, too.”


Guaranteedis not a guaranteed benefit in life insurance.

There are numerous possibilities for reducing benefits in the event of a deterioration in the financial situation of the life insurer (possibly also in combination):

  • Reduction of future current profit participation (effect on reduction of maturity benefits from surpluses, surplus annuities, and on non-guaranteed premium amounts, insofar as offset against surpluses),
  • Reduction of final surpluses not yet committed,
  • Release of hidden reserves (valuation reserves) with the consequence of a reduction in the statutory participation in the valuation reserves as well as a reduction in the interest surpluses,
  • Additional reinsurance to generate reinsurance commissions recognised in profit or loss, with a negative effect on future cost surpluses,
  • Premium increases (including the guaranteed premium) or reductions in future and current guaranteed benefits, insofar as this is provided for by law and not excluded by contract.
  • Reduction also of the guaranteed surrender values limited to one year,
  • Transfer of part or all of the insurance portfolio to another insurer,
  • Transfer of the insurance portfolios to Protektor, if necessary by reducing the guaranteed benefits by up to 5 % (condition: if at all financeable by the industry),
  • provisional prohibition of payment by order of the supervisory authority,
  • Reduction also of the guaranteed insurance benefits by the supervisory authority to the necessary extent, in accordance with the still available actuarial reserve, § 89 II VAG to avoid insolvency.
  • Insolvency with termination of the insurance contracts, if applicable, and payment of the cover funds still available in each case.

They do not have to fear a run on life insurers because they can immediately reduce the surrender values at will and for a limited period of one year each simply by board resolution without the Federal Financial Supervisory Authority (BaFin).


No guarantee of company pension scheme via the Pensionssicherungsverein (PSVaG)

Normal employees are reassured by the fact that the PSVaG will step in if the employer becomes insolvent. If you study the details of the benefits, you will be surprised to learn that if a protection case occurs, the employee no longer participates in surpluses or increases in value – this means that up to more than 50% of the benefits can be forfeited. If, on the other hand, the assets of a pension provider are lost due to its insolvency, the PSVaG simply does not pay anything.


Guaranteed Sander levies and taxes to bail out financial houses or states.

It is not the shareholders, but the small savers who entrusted their money to those who later have the problem of how they are to generate the return demanded by these small savers, because they hope for one percent more return, or because of state subsidies, or because of guarantees, e.g. on capital preservation and guaranteed interest. Ultimately, most capital belongs to small savers, is collected and passed around the world many times in the financial circuit.

If only the major creditors and shareholders of the banks were called upon in the event of bank failures in Germany, then life insurers, pension funds and provident funds would be affected. When the EU demanded that supported banks no longer be allowed to service their subordinated loans, the German Insurance Association (GDV) already said that insurers would now cut back on Riester pensions, among other things (which was then done anyway), and that they would no longer invest money with banks in the future.

The idea that a small layer of super-rich people can pay for everything is completely off the mark. This is an illusory idea, like believing that everyone would be well off if only all millionaires had their silverware taken away from their breakfast tables.

By imposing a “special tax on deposits,” any legislature can effectively eliminate deposit insurance on account balances and insurance assets. The new method of making bank customers in Cyprus share in the losses is just one of many conceivable ways of providing financial institutions with the necessary equity capital too late – and without much prospect of being able to take recourse against deficient supervisory authorities at a later date.


Guaranteed expansion of public debt

While Greek investors until some time ago gladly with German credit institutions their money in security brought, is with Germans a demand still Swiss plants with banks and life insurances also by completely normal age precaution savers increasingly to determine. The need for security is so great that the German state can borrow without interest at all in the short term.


We live beyond our means – but guaranteed still not up to standard

Money is not created by work, by someone being paid for it and giving their share of taxes to the state. Rather, it is created out of nothing, according to the formula: EUR 0 = EUR 100 billion – 2 * EUR 50 billion. In the same way it is destroyed again. And since the one EUR 100 billion is created out of thin air, and does not have to be borrowed somewhere for interest, it is already worthwhile if only very low interest is charged, which at least covers the administrative costs, and costs the taxpayer nothing in the first place.

The administrative costs are low because the allocation of the money is decided weekly by a simple official, who has nothing to decide, because it is always a foregone conclusion that any application for any amount will be approved.

Since these funds do not reach the real economy (e.g. they are not used for real corporate financing, business investments or consumer loans, because that is far too dangerous), they do not do any harm there, e.g. they do not lead to inflation. The only exception is the granting of loans for real estate financing – here, however, the effect is limited to the increase in real estate prices.

However, these are still extremely low and in most locations have not yet reached the level of 1994. The demand from private and life insurers for safe investments can probably only be met by the government increasing its borrowing.

As long as citizens are willing to pay for the national debt and interest, repayment is guaranteed.

If no more, each state can decide for itself if and how much it wants to pay back.


by Dr. Johannes Fiala and Dipl.-Math. Peter A. Schramm


by courtesy of


published in DWZ (, issue March 2015, page 94 – 96)


published in “Der Koment, Fachzeitung für Schausteller und Marktkaufleute” 02/2015

and (Infinity Magazine, 02/2015)


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Dr. Johannes Fiala Dr. Johannes Fiala

Dr. Johannes Fiala has been working for more than 25 years as a lawyer and attorney with his own law firm in Munich. He is intensively involved in real estate, financial law, tax and insurance law. The numerous stages of his professional career enable him to provide his clients with comprehensive advice and to act as a lawyer in the event of disputes.
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