Deutscher Sparkassen- und Giroverband (DSGV)
Deutscher Sparkassen- und Giroverband (DSGV)
Telephone: (49 228) 204-0
Fax: (49 228) 204-250
Web site: http://www.dsgv.de
Gross Revenues: EUR 3.3 billion ($3.9 billion) (2005)
NAIC: 522110 Commercial Banking; 522292 Real Estate Credit; 521110 Monetary Authorities, Central Bank
The umbrella organization called Deutscher Sparkassenund Giroverband (DSGV) oversees the German Sparkassen-Finanzgruppe, a network of 650 financial institutions that together have annual revenues exceeding EUR 3.3 billion. Sparkasse-Finanzgruppe is the largest credit institute in Europe and consists mainly of 463 legally independent Sparkassen (savings banks) that operate regionally, providing a full range of consumer and commercial banking services. In addition, the group has 11 Landesbanken (regional central banks), the DekaBank (the Sparkasse investment bank), 11 Landesbausparkassen (mortgage banks), and 11 regional insurance providers. The group also includes a leasing company, 11 real estate companies, educational institutions, and a publishing house. The Deutscher Sparkassen- und Giroverband provides centralized consulting and advisory services to all members of the group.
The idea of a Sparkasse —loosely translatable as savings bank—first developed in the 1600s in France and England. These were banks specifically for the poorer classes, being institutions in which common workers could deposit money and collect interest. A century later similar savings institutions were being set up in the various German states to aid orphans and the poor. These so-called Waisenkassen, Leihhäuser, and Leihkassen were established primarily through private initiative. They were not banks in the modern sense, but philanthropic, educational, and financial institutions based in a specific community run by volunteers, often from their homes.
The first German Sparkasse, the Hamburger Ersparungsclasse, was established by private initiative in Hamburg in 1778. It was officially founded "for the use of hardworking persons of both sexes of the lower classes, such as servants, day laborers, craftsmen, sailors, in order to provide them with an opportunity to save small sums and their hard-earned money securely and with interest." Similar institutions followed in other German cities. The first community Sparkasse was founded in Göttingen in 1801, the first Prussian Sparkasse in 1818, and the first Bavarian in 1821. The chain reaction was in part the result of a widespread conviction in Germany at the time that the financial welfare of the middle and lower classes was a matter of public responsibility. Nonetheless, until the 20th century most Sparkassen were founded and operated privately.
By 1820 Sparkasse accounts were in principle available to anyone. However, to ensure that the less-well-to-do remained the primary beneficiaries, Sparkassen limited the amount that could be deposited in any account. For example, under the bylaws of the Berlin Sparkasse, no more than 50 Talers could be deposited in an account. It was not until 1838 that Sparkassen first came under government regulation. Communities were required to obtain a permit before a Sparkasse could be opened, and the government maintained oversight of the security of deposits in Sparkasse accounts. By 1836 there were about 280 Sparkassen in Germany, of which about two-thirds were community-based. Their business was restricted to the most rudimentary sort of banking activities: taking deposits and making basic loans, mainly mortgages and the purchase of securities and bonds.
THE SECOND EMPIRE AND WORLD WAR I
Between 1870 and 1918, during Germany's Second Reich, Sparkassen experienced significant growth. By the turn-of-the-century their numbers in Germany had risen to over 2,500. At the same time, deposits and lending activity increased, which increased its economic importance to the country. The institution's organizational structure took on a complexity in the last 20 years of the 19th century. In 1881 the first regional association of Sparkassen was founded in the area of Rhineland and Westphalia. Three years later, when the German post office announced its intention to launch its own Sparkasse. In response, the other Sparkassen formed a national organization, the Deutscher Sparkassenverband (DSV; German Sparkasse Association). Numerous additional regional associations were formed in its wake.
In 1908 Giroverkehr —the cash-free transfer of funds between individual accounts and institutions, a system that developed in Germany rather than checking accounts after the American model—was introduced in German banking. The DSV immediately opened talks with the German government to grant Sparkassen, which were not legally banks, to be allowed to participate in the new transfer system. Only when broad segments of the public represented by Sparkasse clientele were able to enjoy its advantages, the DSV argued, would the real significance of Giroverkehr be evident.
Two of the largest German states, Prussia and Saxony, admitted Sparkassen to the Giroverkehr system in 1909. Under the leadership of Johann Christian Eberle, Saxony launched Germany's first Girozentrale, a central processing point for the new bank transfers. The effect of the central office for Sparkassen was enormous. With it, Eberle organized a network of over 3,000 Sparkassen throughout Germany. By 1916 there was a network of 11 regional Girozentrale, which led in the same year to the founding of the national Deutscher Zentralgirover-band (DZV; German Central Giro Association). In 1918 the first real national central transfer office, the Deutsche Girozentrale, was set up, which led to introduction of truly national Giroverkehr. More importantly for German Sparkassen, the DZV laid the foundations to make Sparkassen universal credit institutions, like other German banks. It also created a network for thousands of local Sparkassen, which were now connected by the new Girozentrale.
World War I led to another expansion of financial areas in which Sparkasse operated. The German government had decided to finance its war aims through loans and the Sparkassen with their enormous deposit reserves were selected as the primary financial intermediary for the issuance of government bonds. The entry into the securities led Sparkassen to new client groups and marked another milestone on its way to becoming the equivalent of a full-service bank.
The Sparkassen-Finanzgruppe is active on the market through over 670 companies. Its tight network of offices and branches provides modern financial services in every region of Germany. With this strategy of regional proximity, the Group's institutions competitively fulfil their public mission. They provide an important boost to regional and local economic and structural development and play a responsible part in communities across the country with many social programmes.
THE WEIMAR REPUBLIC
Following Germany's defeat in the war, government decrees ended many restrictions on the services Sparkassen could provide its customers. For example, in 1921 Prussia removed all restrictions on deposits in accounts and certain types of loans. A bigger new national organization which combined the Sparkassen and Girozentrale, the Deutsche Sparkassen- und Giroverband (DSGV) was incorporated in 1924. The organization's activities included various educational projects. The newspaper Deutsche Sparkassezeitung was founded in 1925; the Lehrinstitut (the Sparkasse school), and the Institut für kommunale Sparkassen- und Kreditwesen, (the Sparkasse research arm) were both set up in 1928.
The 1920s were a period of extreme political and economic instability for Germany and its Sparkassen. The German Reichmark (RM), severely weakened by the costs of the war, was further undermined by RM 226 billion in reparations demanded by the victorious Allies. In 1922 and 1923 catastrophe struck: inflation that wiped out savings and raised the price of a loaf of bread to millions of Reichmarks. Sparkasse deposits dropped dramatically during the inflation, and did not recover until the currency reform of 1923–24. Once the inflation was past, however, Sparkassen entered another era of growth as Germans began saving at high rates. Unfortunately, the prosperity was brought to a disastrous end by the Bank Crisis of 1931. The crisis was precipitated by large banks that tried to expand their business through foreign loans and brought to a high point by the failure of the Österreichischer Kreditanstalt, a major Austrian bank. As more banks failed, money hemorrhaged out of the country. Between May and December 1931 Sparkassen lost more than 13 percent of their deposits. Recovery was made all the more difficult by the Great Depression, which had reached global proportions, and the increasing political instability in Germany.
The government responded with a series of decrees intended to protect the liquidity of Sparkassen by preventing communities from plundering Sparkasse accounts to prop up local budgets. The Sparkassen and the central Deutsche Girozentrale-Deutsche Kommunal-bank, for example, were separated into legally distinct entities; Sparkasse governing boards were separated from community administrations; and mortgage loans were limited, while loans to local communities were banned completely.
Finally, "Sparkasse" was made a trademark that could be used only by legally-recognized financial institutions. As Sparkassen developed as full-service financial institutions, German banks attempted to fight off the competition. The rights of the Sparkassen were recognized in 1933 by the German government's Banqête. The Reich Banking Law of 1934 placed Sparkassen under government banking supervision.
THE THIRD REICH AND POSTWAR GERMANY
Sparkassen lost their right to self-administration under the Third Reich. After Adolf Hitler came to power, they were absorbed into Nazi financial organizations. In 1935 the DSGV was renamed the Wirtschaftsgruppe Sparkassen in der Reichgruppe IV Banken. At the same time oversight of the Sparkassen passed from the German states to the national Reich government. Leading positions at the institution were given to Nazi functionaries, while remaining employees were required to prove their political reliability. The Sparkassen were important to the Nazis, embodying as they did the Nazi ideal of a credit institution that was under public oversight and did not serve the interests of private profit. The Nazis exploited Sparkassen for their own ideological ends. For example, the prestigious "World Savings Day" was renamed "National Savings Day." Savings reserves in Sparkassen increased significantly during Third Reich due to the limited availability of consumer goods as well as government propaganda. The Nazis, like the German kaiser before them, used the saving reserves of the Sparkassen as a source of loans to finance their war aims.
- The first German Sparkasse (savings bank) is established in Hamburg.
- The first community Sparkasse is founded in Göttingen.
- Giroverkehr, a cash-free transfer of funds between individual accounts and institutions, a system the American model, is introduced in German banking.
- Deutsche Sparkassen- und Giroverband (DSGV) is established as a public corporation.
- Sparkassen are made subject to German government's banking regulation.
- Arbeitsgemeinschaft Deutscher Sparkassenund Giroverbände und Girostelle is renamed the Deutscher Sparkassen- und Giroverband.
- East German Sparkassen are integrated into West German system.
- Founding of DGZ-DekaBank—Deutsche Kommunalbank.
After the conclusion of World War II, Sparkassen in the eastern and western zones of occupied Germany went their separate ways. In West Germany Sparkassen emerged from the rubble in an uncertain financial position. As a result of Nazi propaganda, savings assets were high. Unfortunately, some 80 percent of Sparkasse active assets consisted of worthless Nazi war bonds. Furthermore, with the introduction of the Deutschmark in 1948, savings dropped from RM 47.7 billion to DM 2.2 billion. However, the new currency provided a stable basis for Sparkassen recovery, and it would play a major role in the postwar German economic miracle. After the currency reform, new Sparkasse bylaws were drawn up to reorganize the institution's structure. By 1953 those reforms had been completed. The reforms gave Sparkassen more autonomy than they had had for decades. Sparkasse activities were further strengthened by a newly organized parent organization, the Arbeitsgemeinschaft Deutscher Sparkassen- und Giroverbände und Girostelle, which became the Deutscher Sparkassen- und Giroverband in 1953. New areas of business were introduced with the creation of new types of consumer credit.
Two changes in the 1950s led to further growth of the Sparkassen. Beginning in 1957 all wages and salaries were paid via the cash-free bank transfer system, which led workers open numerous new Girokonten —transfer accounts—so that they could be paid. In 1958 a ruling by West Germany's supreme court made it easier for businesses to open branches. Sparkassen in communities throughout the country opened new branches, a fact that increased the competitiveness of the institutions in the German banking market. Private banks lobbied the government that the various rights the Sparkassen were accruing were giving the institutions an unfair competitive edge in the financial market. The West German government sponsored a study of the banking industry to settle the question. In 1968 it reaffirmed the Sparkassen's right under law, declaring them public trusts that operated as a corrective in the banking sector.
At the same time the government made two decisions of great importance for the Sparkassen. First, the taxes Sparkassen were required to pay were tripled. By 1981 Sparkassen would be fully taxed like any bank. Second, however, the Sparkasse's right to set its own interest rates was greatly liberalized. These two changes essentially concluded the transformation of Sparkassen into full-service credit institutions. The higher tax rates were balanced out by a stronger market orientation brought by the liberalized interest rates. The Sparkasse's modernization was evident in the innovative products it introduced in the late 1960s and early 1970s: Scheckkarte (1967), an ATM card; Sparkassenbrief (1967); Dispositionskredit (1968), overdraft protection; Sparkas-senobligation (1970); and the euro-cheque-Karte (1972), another ATM card.
Two months after the end of World War II, the Russians closed the Sparkassen in their occupation zone. They could eventually reopen, and when the German Democratic Republic (GDR) was founded in 1948, they were placed directly under the control of the country's finance ministry. Eventually, however, the eastern Sparkassen evolved into "people's banks"—savings institutions directly under the administration of local councils, whose main purpose was accepting deposits from private individuals and executors of their transfer payments. As would be expected in a centrally-planned socialist economy, Sparkassen were directly integrated into GDR government planning. Using Sparkasse funds for loans was problematic in the GDR. Profitability did not play a part in economic or commercial decision making. The construction of apartment buildings, for example, could be undertaken only when the sufficient raw materials were available. As a result, although GDR Sparkassen administered over 80 percent of East German savings, less than 15 percent were used for loans at any given time. Sparkassen in the GDR were placed under the administration of the country's national bank at the beginning of the 1970s.
When the Berlin Wall fell in 1989, there were 197 Sparkassen in East Germany that were all operating in dire circumstances. Staff was far too short for the needs and office space was narrow and bare-bones at best. As German reunification progressed the West German DSGV advocated freeing the eastern Sparkassen from control of the old Staatsbank and creating a system of administration based on the West German model. Two arguments were brought forward in support of this proposal. First, decentralized financial institutions, such as Sparkassen, were best suited to supporting the reconstruction of eastern Germany. Second, to leave the East German Sparkassen to their fate would eventually weaken the entire German Sparkasse system. In March 1990 the GDR Sparkassenverband, the East German equivalent to the DSGV, was founded. Three months later, the status of East German Sparkassen was altered. They were made community-owned corporations, and their area of activity was reorganized to conform to that of West German Sparkassen. In 1990 East German banking was completely reformed. A new two-tiered system was introduced, consisting of commercial banks on the one hand, with a government-run central bank. When the country was reunified shortly afterwards, the Bundesbank assumed the role of the central bank in the eastern German states.
SPARKASSEN IN REUNIFIED GERMANY
Deutsche Sparkassen faced a new set of challenges in the 1990s: the new European Union, the opening of the nearby East European market globalization, class differences in Germany, computerization, and the Internet. Consolidation was one successful strategy Sparkassen had used throughout the 20th century to contend with social and economic change. In 1910 there were 3,072 Sparkassen in Germany. That number dropped to 1,054 in 1936, 900 in 1946, and 770 in 1990. By 2004 the number had fallen to 477 in all of Germany. That consolidation took place in other areas of the Sparkasse financial group as well. Several Landesbanken—a sort of central regional bank that developed alongside the Girozentralen—merged in Baden-Württemberg, in Hamburg, and in Schleswig-Holstein.
The Sparkassen reached an important agreement with the German government, the German states, and the European Union Commission. As a result, beginning July 19, 2005, liability for Sparkassen debts was lifted from the Sparkasse community administrators. The change placed the relationship of the Sparkassen and the Landesbanken on a normal business foundation. The effects of the new arrangement proved more significant for the Landesbanken. Following the reforms, for example, the Westdeutsche Landesbank split into two separate parts, the Landesbank NRW and the WestLB AG, a private commercial bank. The guarantorship of the Bayerische Landesbank was taken over by a holding company owned by the state of Bavaria and the Bavarian Sparkasse association. In addition, German Landesbanken were threatened by falling international credit ratings in the 2000s, a trend that was headed off by a closer cooperation with their partner Sparkassen. The Sparkasse-Finanzgruppe developed a new strategic plan in 2002 to increase earnings, lower costs, and draw the Sparkassen, Landesbanken, and other group members closer together. The strategy evidently was successful. In 2004 Moody's Investors Service gave the group an A1, its best credit rating.
Gerald E. Brennan
Volksbank; Deutsche Postbank AG.
Ashauer, Günter, Von der Ersparungscasse zur Sparkassen-Finanzgruppe: Die deutsche Sparkassenorganisation in Geschichte und Gegenwart, Stuttgart: Deutscher Sparkassenverlag, 1991.
"Das Annus horribilis der Frankfurter Sparkasse," Börsen-Zeitung, December 31, 2004, p. 53.
Pohl, Hans, Bernd Rudolph, and Günther Schulz, Wirtschaftsund Sozialgeschichte der Deutschen Sparkassen im 20. Jahrhundert, Stuttgart: Deutscher Sparkassenverlag, 2005.
Witte, Barbara, "Sparkasse.de: Wie viel Zentralität muss sein?" bank und markt + technik, January 1, 2002, p. 25.