Protection system of BayernLB

Protection system of the savings bank financial group

In Germany, private commercial banks, public law banks, and co-operative banks each have their own guarantee systems. BayernLB is a member of the Landesbank guarantee fund. This fund was set up as a means of coverage for banks as defined in Section 12 of the Einlagensicherungs- und Anlegerentschädigungsgesetz (German law on securing deposits and compensating investors) and is recognised under public law. Its purpose is to protect the member banks and to guarantee in particular their liquidity and solvency. If the existence of the member institution is safeguarded in the event of a crisis, creditors' deposits, particularly savings deposits, time deposits, sight deposits and certificates (i.e. Schuldverschreibungen, Zertifikate) are also protected indirectly. This protection is not limited to a specific maximum amount.

The customer cannot file any claims against the fund. BayernLB's membership of the Landesbank guarantee fund means it is part of the guarantee scheme run by the Sparkassen-Finanzgruppe under the umbrella of the German Savings Bank Association.

Protection for BayernLB creditors in case of a change of ownership

In accordance with Section19 II of the statutes of the deposit insurance fund of the Landesbanks and Giro institutions which can been seen at www.dsgv.de (also see down load box on the side), customer deposits and bonds issued by BayernLB remain protected if they were established prior to the announcement that BayernLB is leaving the deposit insurance fund of the DSGV (German Savings Banks Association). This does not apply to liabilities that were extended at the request of the customer after the announcement or which the customer did not terminate or claim back at the next date possible after the announcement.

The scheme consists of:

• Landesbank guarantee fund
• 11 regional Sparkassenstützungsfonds (savings bank guarantee funds)
• Guarantee fund of the state building societies (central building societies).

All these funds form a cross-guarantee system so that they are readily available to one another as extra coverage should this be necessary.

The Joint Liability Scheme provides a maximum degree of security for customers of the Sparkassen-Finanzgruppe.

Since the establishment of the Guarantee System of the Sparkassen-Finanzgruppe in the 1970s

• no customer of a member institution has ever lost his or her deposits;
• it has never been necessary to indemnify depositors;
• no member institution has ever defaulted on its financial obligations,
  let alone become insolvent.

Operation of the Joint Liability Scheme

The various guarantee funds of the Landesbanks, the Landesbausparkassen (the central building societies) and the 11 regional Sparkassenstützungsfonds that are affiliated to the Joint Liability Scheme are interlinked.
The 11 guarantee funds of the regional associations of savings banks are interconnected by means of a Supraregional Compensation Scheme. Should the expenses incurred by a regional savings bank association for the settlement of a support case be in excess of the funds to be provided by the regional guarantee fund, the excess will be covered by the Supraregional Compensation Scheme. In this way, all the 11 regional guarantee funds jointly assume liability so that, if need be, the total volume of all funds can be jointly made available, although the regional guarantee funds retain their independence.

The Deutscher Sparkassen- und Giroverband (DSGV) has established separate funds for the Landesbanken/Girozentralen (the Guarantee Fund of the Landesbanks and Central Giro Institutions) and also for the Landesbausparkassen (Guarantee Fund of the Central Building Societies).

The association of all the savings bank guarantee funds is interlinked with the two other funds (the Guarantee Fund of the Landesbanken and Girozentralen and the Guarantee Fund of the Landesbausparkassen) via the Joint Liability Scheme. This Scheme will assume liability if the expenses required to settle a support case are in excess of the funds available to the guarantee fund concerned. This means that this Joint Liability Scheme has access to the total volume of the financial resources of all the guarantee funds to safeguard an institution in the event of a crisis.

Maintenance obligation and guarantors' liability

Until 18 July 2005, BayernLB benefited from owners' guarantees in the form of "Anstalts¬last" (maintenance obligation) and " Gewährträgerhaftung" (guarantee obligation);
Anstaltslast (maintenance obligation) means that the owners are obligated to ensure the Bank's solvency and make certain that the Bank can fulfil its financial obligations at all times.
Gewährträgerhaftung (guarantee obligation) means that the owners are fully and directly liable for the Bank's liabilities.
While "Anstaltslast" expired on 18 July 2005, "Gewährträgerhaftung" will remain in force through the so-called "grandfathering" which was agreed as an interim solution. In keeping with this concept, liabilities which were incurred from 18 July 2001 to 18 July 2005 and which mature no later than 31 December 2015 will conti¬nue to be covered (grandfathered) by "Gewährträgerhaftung". Liabilities which were incurred before 18 July 2001 will continue to be grandfathered even up until their final maturity.

On the contrary, those liabilities incurred after 18 July 2005 are not covered (grandfathered) by "Gewährträgerhaftung", meaning they are unguaranteed.
The Free State of Bavaria and the Association of Bavarian Savings Banks made the following statement on "grandfathering" (in addition to the regulations laid down in the law on Bayerische Landesbank): they will immediately fulfil their obligations under this guarantee system if and when the creditors of the relevant liabilities cannot be satisfied from the Bank's assets.

Legal framework

The binding legal framework for Bayerische Landesbank is the Law on Bayerische Landesbank as published on 9 June 2005 and as last amended on 01 Mai 2007 by way of an act.

The Statutes of Bayerische Landesbank were rewritten as published in the Bavarian State Gazette on 9 August 2002 and last amended as published in the Bavarian State Gazette on 02 May 2008.

The above-mentioned documents can be found in the download area next to the text.