Et didn’t last a minute before Helmut Schleweis, President of the Savings Bank, deviated from the text he had prepared for the speech, which the banking world in California was still fine with. Since the collapse of the 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, if only for stock prices.
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 these data for the last time; In 2024, his newly elected successor Ulrich Reuter will do it. Schleweis said he wanted to address “the elephant that’s in the room.” He spoke of the Silicon Valley Bank’s concentration on a specific sector, namely lending to young companies, and then followed a remarkable sentence: “With our regulation, that would not have happened.”
Since the beginning of 2018, when Schleweis moved to the top of the German savings bank organization, the native of Heidelberg has hardly missed an opportunity to cool off with regulation. Especially in the regulation of the smaller institutes. In the USA in particular, former President Donald Trump relaxed the rules introduced after the financial crisis in 2007. And as if Schleweis knew that he was treading on thin ice with his praise of regulation in Europe and Germany, he added: “We have never expressed criticism of regulation on issues such as capital and liquidity.”
Bonds in own custody
The issue of capital and liquidity is – and they have this in common with the Silicon Valley Bank – not unimportant for the German savings banks either. What they both have in common is that they have bonds in their own portfolio that have drastically lost value as a result of the interest rate turnaround. In contrast to the Californian start-up financier, the German savings banks have not yet had to realize any losses in order to obtain liquidity by selling the securities. The losses are only in the books so far: 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 operationally so strong in 2022 that they now only have to use a very small part of the precautionary reserves formed earlier to finance these temporary value adjustments.” That’s why the savings banks observed the development “with respect”, but they “generally do not cause any concerns”.
Neither Schleweis nor his board colleague Karolin Schriever, who is responsible for regulation, wanted to give exact numbers of how resilient the savings bank’s own security system is. Verbally, Schleweis stayed on the surface: “As of now, I don’t think the effects of the Silicon Valley Bank will spread to the German credit system.” And: “I don’t know of any savings banks that are in trouble at the moment.” can rely on the deposit insurance.”
dissolution of provisions
Before taxes, all public financial institutions earned 4.2 billion euros in the past year, around one and a half percent less than in 2021. The annual surplus is 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 profit declines due to value adjustments on bonds held. When asked about this, Schleweis replies somewhat succinctly: “I assume that our numbers are correct and so is everyone else,” but then adds that 200 million euros in provisions were released.
While the President of the Savings Banks was still warning in the autumn of upheavals caused by exploding energy prices, gas shortages, inflation and a drastic reduction in the ability to save, he has now priced them out again: “The widely expected recession has not materialized – and we are no longer expecting it either.” The customers of the Savings Banks still putting money on the high edge. Deposits from private customers increased by 2.3 percent to EUR 882.6 billion. 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 institute in the savings bank finance group. Schleweis, who will be in office for another nine months, did not backtrack. “I haven’t regretted raising the issue because I still think it’s the right thing to do.” There’s also movement in the Landesbank sector, the slower path. The central institute would have been quicker: “One day we will see a central institute. But I don’t have a forecast as to when that will be.”