Are there any banks that have gone bankrupt?
Because of increasing bankruptcies in autumn : Is Germany threatened with a banking crisis?
In the end, the losses were simply too high, too many events were canceled. Sarah Wiener has filed for bankruptcy for her restaurants and catering service. "We are a bit paralyzed and at a loss," she told the German press agency. If you believe experts, cases like theirs are likely to increase in the near future - with enormous consequences for the economy and the banks.
According to the German Chamber of Commerce and Industry (DIHK), 40 percent of companies are currently reporting liquidity shortages: they find it difficult to pay their bills. Every tenth company is therefore already threatened with bankruptcy. It will get really serious from autumn. Because companies are still exempt from the obligation to file for bankruptcy immediately in the event of insolvency. At the end of September, however, this special regulation should expire. "We fear a bankruptcy wave of dramatic proportions in the autumn," says DIHK President Eric Schweitzer.
The credit insurer Euler Hermes anticipates an increase in insolvencies of twelve percent for Germany this year and next. That would mean: 21,000 companies would go bankrupt. This would not only have consequences for companies and their employees. It would also be dramatic for the banks that have granted loans to companies. Because they would not get back a large part of the borrowed money. "We have to expect that there are still serious problems," says Michael Peters from the citizens' movement Finanzwende. He fears: "A wave of bankruptcies in the fall could trigger a new banking crisis."
Worldwide, the rating agency S&P is already expecting loan defaults of 2.1 trillion dollars this year. Another $ 1.3 trillion could be added in the coming year. According to the financial supervisory authority Bafin, German banks must also be prepared for some of their customers to go bankrupt. "Larger loan defaults can still occur," said Bafin boss Felix Hufeld. "I expect that this will happen in waves in this and the years to come."
The bankers themselves are still calm at the moment. “We have a good early warning system,” said Marija Kolak, President of the Federal Association of German People's and Raiffeisen Banks (BVR) recently in an interview. “At the moment there are no traffic lights on red.” The cooperative banks alone have granted deferred payments for loans amounting to 15.7 billion euros. That sounds like a lot, but it only corresponds to 2.7 percent of the total loan volume. The situation is similar for the other banks. At the savings banks, for example, 366,600 customers have currently deferred payments.
But how bad does it get when a row of companies should go bankrupt? What if the banks not only have to defer loan installments, but also no longer get their money back?
"The loan defaults could burden Germany's banks so heavily that they themselves find themselves in dire straits," say the economists from the Leibniz Institute for Economic Research in Halle (IWH). For their analysis, they linked the key figures of more than half a million German companies with the balance sheet data of over 1000 German banks. In the worst case, so the result, hundreds of financial institutions could get into trouble. IWH President Reint Gropp warns: "Even if things are going very well for the German economy, we think a new banking crisis is likely." Even if the economy recovers quickly, dozens of financial institutions could get into trouble.
In contrast to the situation after the financial crisis, when the big banks in particular got into trouble, this time it could particularly affect the regional banks. Because they mainly give loans to small companies. And more often they belonged to those industries that were affected by the shutdown, argues the IWH. If they went bankrupt, it would be very damaging to the regional institutes.
The banks consider the criticism to be wrong
At the East German Savings Banks Association, however, the IWH study is considered excessive. "It is the repeated time that the IWH tries with sensational reports to denigrate the real situation of the savings banks", says association president Michael Ermrich. “We reject that.” In the corona crisis, as in every crisis, loan defaults would increase. But in view of the good capital resources of the institutes, one does not expect the OSV to run into difficulties for the savings banks.
One sees it similarly with the cooperative banks. The institutes would certainly have to set aside more for bad loans. "But we also come from a level where we can cope with certain failures," says BVR board member Andreas Martin.
German institutes had earnings problems even before Corona
The consulting firm Oliver Wyman, which has looked at the consequences of Corona for European banks, sees it a little differently. She expects that the institutes will have to cope with loan defaults of 400 billion euros in the next three years. That is about as much as during the debt crisis - but not nearly as much as during the financial crisis. "It is unlikely that the pandemic will paralyze the European banking sector," says Christian Edelmann, banking expert at Oliver Wyman. At the same time, however, many banks could be forced to radical restructuring measures due to poor earnings. This, in turn, could particularly apply to the major German banks, which were already under pressure before the corona crisis. Commerzbank, for example, should already think about cutting every fourth digit.
In addition, the financial transition expert Peters does not consider the institutes well-equipped enough. The banks are now better protected against loan defaults than they were before the financial crisis. But from Peters' point of view, that's not enough. “In order to be more crisis-proof, the banks would have to hold at least ten percent of their total assets as equity,” he says. However, the supervisory authority currently only prescribes a so-called leverage ratio of three percent. Hardly any institute comes close to the desired ten percent. A higher number of loan defaults could therefore be dangerous for the banks, says Peters.
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