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EU approves German bank deposit guarantee
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08:38, January 23, 2009

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The European Commission said on Thursday it had approved a German plan to provide a guarantee of 6.7 billion euros (8.7 billion U.S. dollars) to the country's banking deposit insurer SdB.

"The guarantee is necessary to avoid a serious disturbance in the German economy and to ensure the stability of the German banking sector while avoiding undue distortions of competition," the European Union (EU)'s competition guardian said in a statement.

The guarantee aims at providing collateral for a bond in the amount of 6.7 billion euros issued by SdB and subscribed by some German commercial banks.

SdB is a newly created banking entity, which supports the Deposit Protection Fund of the German private commercial banks in processing the compensation payments.

The aim of the bond issue is to compensate depositors of Lehman Brothers Bankhaus, the German subsidiary of the U.S.-based investment bank which collapsed in September.

It will enable the Deposit Protection Fund to pay compensation before it receives future payments from the insolvency assets of the insolvent Lehman Brothers Bankhaus.

The Deposit Protection Fund of the German commercial banks fully secures the deposits of each and every customer at the private commercial banks up to a ceiling of 30 percent of the relevant liable capital of each member banks.


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