Guarantee Mechanisms

Voluntary institutional guarantee system and statutory deposit guarantee scheme

The German Einlagensicherungsgesetz (EinSiG - Deposit Guarantee Scheme Act) took effect on 3 July 2015. The act transposes the corresponding EU directive into national law. The Sparkassen-Finanzgruppe has aligned its tried and tested joint liability scheme with the requirements of the new law and it is now recognised as a deposit guarantee scheme under EinSiG.

Voluntary institutional guarantee system

The main purpose of the institutional guarantee system is for the member institutions to mutually protect each other in order to avert any threatening or existing financial difficulties. In this manner it should be possible to avoid invoking the deposit guarantee scheme so that the customer relationship can continue without any limitations.

Statutory deposit guarantee scheme

The Sparkassen-Finanzgruppe's institutional-based mutual guarantee system is officially recognised as a deposit guarantee schemes under the German Deposit Guarantee Scheme Act . If in an exceptional situation the institutional guarantee system is not able to solve the problem, then customers deposits’ (including deposits held with a branch office of a member institution in another country of the European Economic Area) are protected under the German Deposit Guarantee Scheme up to EUR 100,000.

Guarantee obligation and grandfathering for bonds

Until 18 July 2005, BayernLB benefited from the maintenance obligation and guarantee obligation provided by its owners.

Guarantee obligation means that the owners are fully and directly liable for the Bank’s liabilities.

Although the maintenance obligation expired on 18 July 2015, transitional arrangements known as grandfathering were agreed for the guarantee obligation. Under grandfathering, liabilities incurred between 18 July 2001 and 18 July 2005 (inclusive) with a term that does not extend beyond 31 December 2015 continue to enjoy (grandfathered) guarantee obligation. For liabilities incurred before 18 July 2001, guarantee obligation continues until maturity.

Maturity of Liabilities
Date of Issuance Up to July 18, 2005 July 19, 2005 to
Dec 31, 2015
After Dec 31, 2015
Up to July 18, 2001 Maintenance and Guarantee Obligation Guarantee Obligation Guarantee Obligation
July 19, 2001 to July 18, 2005 Maintenance and Guarantee Obligation Guarantee Obligation No Guarantee
After July 18, 2005 No Guarantee No Guarantee

However, liabilities incurred after 18 July 2005 are no longer covered by guarantee obligation and thus are not guaranteed.

The Free State of Bavaria and the Association of Bavarian Savings Banks have stated in respect of the grandfathering arrangements (in addition to the provisions in the Bayerische Landesbank Act ) that they will immediately honour their obligations under this guarantee system if and as soon as creditors of the corresponding liabilities cannot be satisfied from the assets of the Bank.