It took less than a minute for Sparkasse President Helmut Schleweis to deviate from his prepared speech, which the banking world in California was still in order when it was written. Since the collapse of Silicon Valley Bank last week, however, the banking world is no longer in order. Neither in California nor anywhere else in the world. Silicon Valley Bank has sent shockwaves through the financial world, even if it has only affected stock prices.
Archibald Preuschat
Editor in Business
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It would have seemed strange if Schleweis had only tried the general sentence when presenting the cumulative figures of the 359 German savings banks: "In addition, the very rapid turnaround in interest rates is clearly noticeable." Especially since Schleweis presented this data for the last time; In 2024, his newly elected successor Ulrich Reuter will do so. Schleweis said he wanted to respond to "the elephant standing in the room." He spoke of Silicon Valley Bank's focus on one particular sector, namely lending to young companies, and then followed by a remarkable sentence: "With our regulation, this would not have happened."
Since the beginning of 2018, when Schleweis moved to the top of the German savings bank organization, the Heidelberg native has hardly missed any opportunities to cool his hat on regulation. Especially the regulation of smaller institutions. In the USA, former President Donald Trump has relaxed the rules introduced after the financial crisis in 2007. And as if Schleweis had guessed that he was treading thin ice with his praise of regulation in Europe and Germany, he added: "We have never voiced criticism of regulation on issues such as capital and liquidity."
Bonds in own custody account
The issue of capital and liquidity is – and they have this in common with Silicon Valley Bank – not unimportant for the German savings banks either. Because both have in common that they have bonds in their own custody account that have drastically lost value in the course of the interest rate turnaround. In contrast to the Californian start-up financier, however, the German savings banks have not yet had to realize any losses in order to obtain liquidity by selling the securities. The losses are so far only in the books: The value adjustments of the German savings banks add up to 7.8 billion euros.
"A snapshot that does not reflect the lasting reality," says Schleweis and continues: "The savings banks will be so operationally strong in 2022 that they now only have to use a very small part of the pension reserves previously built up to finance these temporary value adjustments." That is why the savings banks are watching the development "with respect", but it is "generally not a concern".
Neither Schleweis nor his board colleague Karolin Schriever, who is responsible for regulation, wanted to give exact figures on how resilient the savings bank's own protection system is. Verbally, Schleweis remained on the surface: "As of now, I do not believe that the effects of Silicon Valley Bank will spread to the German credit system." And: "I am currently not aware of any savings bank that is in trouble." Schriever added: "We can rely on deposit insurance."
Dissolution of pension provision
Before taxes, all public financial institutions earned 4.2 billion euros last year, around one and a half percent less than in 2021. The annual net income stands at 1.5 billion euros, in 2021 it was 1.6 billion euros. The almost stable result is somewhat surprising, as large regional savings bank associations – for example in Baden-Württemberg or eastern Germany – previously reported significant declines in profits due to impairments on bonds held. Asked about this, Schleweis answers somewhat succinctly: "I assume that our figures are correct and so are all the others," but then adds that 200 million euros in pension provision have also been liquidated.
While the savings bank president warned in the autumn of upheavals caused by exploding energy prices, gas shortages, inflation and a drastically reduced ability to save, he has now priced them out again: "The widely anticipated recession has failed to materialize – and we no longer expect it." The customers of the savings banks are still putting money on the high edge. Deposits from private customers rose by 2.3 percent to 882.6 billion euros. The balance sheet total of the German savings banks grew by 1.6 percent and cracked the 1.5 trillion euro mark.
There was still time in the discussion for Schleweis' favorite topic: the creation of a central institution in the Savings Banks Finance Group. Schleweis, who will be in office for another nine months, did not row back. "I haven't regretted setting the theme because I still think it's the right thing to do." There is also movement in the area of the Landesbanken, the slower way. The Central Institute would have been the quicker: "We will see a Central Institute one day. But I don't have a prognosis as to when that will be."