• Savings bank leader raises threat of bank runs in Germany
  • EU finance chiefs have progress report for mid-June meeting

German savings banks and business groups lobbied against joint European deposit insurance, saying the European Commission’s plan undermines trust and could lead to bank runs in Europe’s biggest economy.

Associations representing Germany’s small and mid-size companies, the so-called Mittelstand, as well as savings and cooperative banks said Tuesday they wanted to lend support to Chancellor Angela Merkel’s government as it resists the proposal to introduce shared euro-area deposit insurance over time.

“Savers will only lend to the economy through credit institutions if they have complete confidence in the safety of their deposits,” Georg Fahrenschon, head of the DSGV savings bank association, said at a joint news conference in Berlin. The danger of bank runs in Germany may arise if savers come to fear “a misuse of funds” to help troubled banks in other euro countries, he said.

Euro-area finance ministers will probably discuss the topic at a meeting in Luxembourg on June 16-17, with the Netherlands saying they should consider alternatives to the European Deposit Insurance plan, including an agreement between governments rather than at the EU level.

German Finance Minister Wolfgang Schaeuble has said that risks in euro-area bank balance sheets must be reduced before they can be shared via joint deposit insurance.
The European Central Bank has said risk reduction and risk sharing should proceed in parallel.

Gerhard Handke, managing director of the Berlin-based BGA lobby of wholesalers and exporters, said Italy’s banking association has put the value of Italian loans that “can never be paid back” at a 20-year high of about 200 billion euros ($227 billion).

“We see no convincing reason to merge national deposit insurance systems into a single European system,” Handke said.

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