^
v- UNIES
CONSEIL
ECONOMIOUE
ET" SOCIAL
LIMITED
17 August 1966
/A/
Originals BHGLISH
COMMISSION POE APHICA Seminar on Looal Government Pinano©
Addis Ababa, 5-17 September, 1966
TEE GSBMAS 3AV3MS BAUK SYSTEM
This paper has "been contributed by Dr. Werner Schmidt, Boteerttforde, of the German Foundation for Developing
Countries. The views expressed herein are not necessarily
those of the United Uations.W ,id yrf ^s^ifcfi^frroo freed" bj3j! ^:;h;'.gc Ri;iT \l
ton crcje nie-xoii ^seaQicrxe awsiv erfT •
Savings^Bank
By Dr. Werner Schmidt, BcfcernfSrde ■
Introduction ...
The German'Credit System is based on ... . - . ■";
(a) Banks (puliLioY semi-public or private) ' : " { (b) Mutual Loan Societies - Credit cooperatives, especially : ! - '■-
for farmers and; siSail .business -^.. ,. 7 ■
(0) Saunicipal'Savings-Banks. '■ ' •-' ■ ■■" :■ ■ .: s-■-::<::. ■.-,-
■■■,-■ ; <■•<■■:, !^>;-* ,. • •>■>■ -.. ■ :■- '--.■■■ . .■ ,-.., : .-.- -■ :-■ »f ■
Germany is' the classical country of Municipal Savings Banks.
(1) History "-• .'■'-■ "'■ • .^,. : ..: [!-j:J-:^. ■ \: ';,V--,;;O^;i The existing history of German Savings Banksris essential'and "J instruofivej because it shbws1 the way from a developing to a "-'■ ° develoi>ed sobieiiy in a special field. The idea of Saving Banks
arose "under the tensions of;:an economy turning from simple •' ■' ■siSbeistance' towards^the monetary basis. ; L-
The initial ideas were philanthrcjiic((the Frenohiaan-3)el»stT^, 1611; the Englishman Daniel Defoe* 1697)> especially to find
a way for prbt&eting trusts-money of oarphans and'to open a . ft credit faGiltt^for'the poor working class. Protection: .■ ■
and oredii'faoaiitles- for'the socially* weak - .these were
the ruling ideas inSthe?.beginning. The; first ■ "orphans fund"
was established: in Southern:! Germany by \a priest in 3.749* 1&e first Credit Funds were developed in Northern-Germany in 17^5
and 1768.. !Th.e capital, was collected by grants from public
and private sources.;, The first., Sayings Banks in . the modernsense were established in.Hamburg 1778,;,in Oldenburg 1786. and
in Kiel 1796. The ideas of these establishments of private
initiative with the moral backing of the municipalities were:iS^
Page 2
(a) to encourage and collect savings in small deposits from
people of the lower classes, . .
(b) to provide correct administration and a safe repository of
these savings,
(o) to give a credit facility for the poorer part of the population, for cases of need on reasonable conditions.(against usury), (d) to propagate the idea that saving is,a way for .development ,
by one's own initiative even for the weak, . .
This movement was a common European one- The typically German way was found by the combination with another .developments the early l?th century was a time of renaissance of Local Governments The two guiding ideas
(a) administrative initiative from "below and- ...
(b) economic initiative from the weaker part of the people.
w«-r« combined in -the establishment of Municipal .-Savings Banks*
In I836 already of 28l Savings Banks in Germany two thirds were.
municipal institutions- In 1838 the Prussian State regulated the Municipal Savings Banks by law regulating,structure* administratiaa*'
security of savings accounts, business and central supervision and
control* ■ . . . ,
By 1880 1191^Savings Banks with.786 branches, mostly under municipal control, had been established? 2.9 million savings
accounts with an avarage balance of 541 marks (- 125 TO dollars)
per depositor were administered* This represented 'a per capita - ■
saving of 58 marks (« 15'US dollars) of the entire German
population- ■ ' - ■ *■■.''■■■' ■ ■
The Savings'"Bank System, developed under the modest auspices'
of philantropy and social care, had formed its own role
in the industrial revolution of the country. ■ r
(a) It opened credit facilities for iihe development of an economic middle-^cla'ss (handicraft, ;ifcodern%^j^$ittr©y small industries, small c'bmmercey professiorialgr6ups)y :
(b) It was ahelp for reconciling tfoe'masses of worfcera in the
^n&v industries wiih the spciety by. opening opp6rtuhitiea_fc»v - - individual economic progress- ,. . ' ■■ .,■ ■'. ''" "[
■(2) Preaeat.•■s-taJuaii.n; the Federal?iRe£utile (3l/l2/<i5) : ■ ■■.■-, - (a) 863 Savings Banks with 4427 main tranches and 8*63 secondary
"branches- ' " ■ ■ :'; ■'■' " " ; ;■■-■■( ...--..:.
Gf these 863 Savings Banfcs are: ■';■ ;
248 City and Borough Savings Banks364 Kreis (Local District) Savings Banks ■-;..;■;:-
T2 Village and market town Savings Banks . ■■.■■- ■ ■■;, ,
161 Joint Savings Banks (co-ops of two or mo^e XoofI (b) Staff'in'Savings Banks Service: -: ji ^ l
6 969 Local Government officials
79 8J1 Public Employees . ;
15 537 apprentices,
further in the Savings Banks Central Clearing Houses
("Giroaenirale"):
27 officials
11 623 public employees
1 005 apprentices:/: (o) Sayings deposits! 69.3 billion marks (l?,»5 billion
Other, deposits; 20 billion marks\ . v, . : , ,
(d)r Savitfgs accountxdodumente4 by savings "books': 39*5
■ ' ■"■ -ralHion whi'chVambunHis tol.I7Q*-markar savings ae%ount»
nper'ca^itai;or^l»-74S«- marks ^average savings aooount.
(e) Savings deposits in ail German banks:
11J-5 "billion marks;
in the Savings Banks system 69 • 7 billion marks *"':'
Page 4
■Othere deposits in all German banks 78.8 "billion marks;
j/in-the: Sayings .Ba^lg^a^stwn....,25'9-^illion .marks. = 32.7 ,$•.. ■■.-.
Total deposits [±ntall German Ban^ 196-3 billion mark;ss:4n the*.Sayings/Banks system. 95» 5 billion.marks » 48*6 fo. . , .;, .
A:.'-':: ': '■ ;.' ;■;:"£; .'■'■■i ' ■ j;- -: ■'. ■ .'.; ■ ■ - - '■,■ ' ■ ' ■ ■■.■:•' {■ ■ ': ; ■■.:-■ ^
(f) Loans granted'by'Savings Banks:' ' ■« •>- ;;
Total credits 67° 7 "billion marks . .
siiort term, medium term and paper credit 17*0 .■billion marks;mortgages^ 11.4 billion marks . ; ■ .. ;
munioipal credits 15«3 billion marks . ; transitory credits 4-0 billion marks
C3) Or^.nisati£n_of l^ni£ip_ar §aving^ Banks
(a) i Savings Banks, aret?Bodies Corporate. Th&j are governed by
;(aa) Federal law gives the outlines of.business policy to
safeguard that Savings Banks like other banks work onthe lines of=national fiscal policy*
(bb) Land (State) law regulates the general lines of the
organisational set-up* It offers models of internal organisational fraHLWhicb Local-Councils may select*
(oc) Statutes (by-laws) passed by jocal Councils regulate
organisation and functions of the individual SavingsBank in detail within the frame-work of Land (State)
and Federal legislation*
(b) ThV'munieiJpal corporations are Trustees of their Savings Banks and guaranteeing authorities- ■£or all liabilities.
Up till'1931 -Savings Banks ■werj^,.insti.tutipns or departments' of .4;h^^nicipalvadr[anistrA.ti:on> without being -bodies corporate.
To secure a certain independence;;;from.Local Councils.and as a safeguard against unreasonable credit demands from the . trustees^ the Savings Banks got the status of bciies oorporate with a specific organisation by Central Government law.
Page 5
(o) The Board §f Director^/(or Bagrd of Administrates*) is
appointed by "the Local•;Council• It is composed of from 6 to 10 members 9 usually under the chairmanship of the
chief administrator of the-trustee-Ksorporation (Buyger- meister, Landrat, Stadtdirektor, Kreisdirektor). The.
members are partly-councillors of the trustee—oorpo^
ration, partly experienced private citizens* all r:
appointed by the Councils ' " ' ' ;; : The Senior Officers, of the Savings Bank are usually officials (life-time status) of the txustee-oorpo-
ration. ,, The, status, of "official'1 secures training, independence ,and legality of the leading personnel.
(&) Supervision o^6r Khniolpal .Savings Banks is effected ..by
different bodies: . . : ,. , .
(aa) Audi ting ,,is .usually done by the "Savings Banks and Clearing Association". The reports are submitted to
the Board of Directors and to the Minister of interior^
(bb) The; Minister of Interior (liftnd)'is the main ;, ;
supervising authority as to legal ©zeoution of dutiest
(oo) A Qp;sclal Federal-authority, exanli&vg; pX% tafifce ;
:■"-■ whatsoever,■■supervises the Savings Banks as to their r acting on: the Mines of national fiscal policy. ■.
(a) D'eooniral'igpdtRainess policy
As Local Government means decentralisation of ad- minis^rative wdrfc, Hinicipal Savings Banks follow
the same line iti-'^he-field of credit policy.(aa) Deposits collected within the area are In-
ve"s%ied wit"hin'th1© area; ■ > ,
^*-gf^&.ra5-t-' ■--_
/
Page 6
(b"b) Out oF;*he 'savings deposits mortgages are
■'to local inhabitants or looal housing cooperatives.:.-■■■ \.:
: ; Savings Banks have been important promoters- of ' '''■/$
"private :and Co-operative house-building concerns .; .;- ...
in post-war- Germany* From 1950 to 1965 59>5. billion
marks'^h'ave "been invested in: housing. : , . r ■ ,: ,.-:=; It(oc) A further part of 'savings deposits is granted as ,
long-term investment capital ,to; local ,middle-<jlass , ;
enterprises and farmers* I
■■•.-.-' ■ . . . " ; ■ ■■ ... ' t.
(dd) Long-term loans to municipalities are granted out of
savings deposits up to a limited ratio,(ee) Prom short-term deposits working capital and •ther
short—term lendings are granted to middle-class enterprises, farmers? othe^ customers and Local ;Councils- '
(t>) ^he general banking principles are applied in a
modified form:
(aa) Security is effected ^ statutory limitations of :
* - credits and. by a quota system of the different ty£es of credit.: These provisions are prescribed
' :' "by law and by statutes and supervised.by the. supei^rising authorities. The idea is> to distribute and diversify the risks of credit operations as far as possible.
Example: 50 fo of savings .deposits is the maximum for housing mortgages; 12.5 $ of, savings deposits is.the
maximum for long-term jjiunicipal credits. . Other provisions- oblige Savings, Banks to colleot
reserve funds (no distribution of profits to a . . .
trusteer-oorporation. as long as reserve funds
are below a prescribed minimum)• Special reserves for eventual losses are prescribed and acknowledged
as tax—free assets*
Page f
fcis an important principle.;£pr:;;
For Savings Banks ii is of a stiir higher,impo.3?tanoe,
■: - jecause of the large number of small depositors and
their susceptibility in case of.a political,-economic '": : or psychological-crisis.. Therefore, a certain part■■ of Savings deposit must te kejbt in assets of high
. liejuidity? e.g. minimum liquid reserves as balancesin the Savings Bank System or in the Central.Bank
System. ' ■ ' "■.-'■ ; "■- ■ '.. ■"■'■■' ■'■■ '■'' -. •.■'■■;' ■ ooV Profitabilityy a leading principle-for. private banks,
-; is limited by the fact that Manioipal Savings Banks are
public services* Security and liquidity have precedence over profitability* After filling-up security'reserves
* ;' any surplus goes to the trustee—corporation for public purposes compatible with common benefit character of
*':rt ' the Savings'
(5) Function^ ^f^and^specjialjr^^lat^onsjf^r^Sav^ngs^^Banks_
{a) Apar¥irom the'savings business as such, the German ■
Savings Banks engage in nearly all other banking^businessby ^hprt.term deposits (on "current accounts") *..: transfers,^ ■,
and clearing transactions, long and short terra lpana* *.-;r investment' of, own resources in bonds .and other .fized-interest bearing.securitiess administration, of bonds and shares for others, acceptance credit, and other banking -sej?vices«(b) Savings" Banks are;no%:'allowed to biiy^ shares £iim^ their cam reBourcesl' They heed' special :a^proval>!iii; they inveVt own resource's- iri:'private ^k ;
(c) The main field of business "on the passive side" is ihe
coileotion and administration of savings accounto.
Page 8
(aa), The main characteristics of savings accounts are:
. ■ : a Savings (deposits) Book is issued as a publio
: document - payments are normally effected in cash, no
; -■' transfers, or-standing orders from, only to. savings . :
accounts - money may be withdrawn in all Savings Banks ,in Germany (and Austria) on presentation of the Savings
Book *- interests are calculated after an interval of two . . weeks* ■? -.-. ■'/ .■ .- - . ■■ ■■ . :. ■■ ■ .■■-.. ■ '■• ■■ -{"bh) Payments from savings accounts - .. ,.._"
', ' > (l) UP :^o 1000,- marks per month without. limitation, .
(2) the legal notice, if no special agreement is made,■ requires 3 months,
C3J a Ionge3>. nqtloa may be po»t3?ao*feed»
The rate of interest depends on the p«ri.od of hoti«a#
They are relatively high at present: for savings
.accounts "on legal notice"; 4 X/2 fi on annual iiotice 4 5 1/2^
on more than 3 years: free agreement, . . -. ■
In 1965- the German Savings Banks paid 2.44 billion
marks as interest to the savers.Th.©-*G«rman Sarvlngs Bahkg -propagate the idea of saving in ;
many fields* ■■•-■■
(aa) School-saving was effected in 1965 in 24*408
schools: 2.8 million students saved during this one - 'year 5®«3 million marks. " ■ ' :
(;T3"b) Six million money-boxes were distributed to savers«,... ,- In I965 80 million^ marks were oolleoted in this way* .
(ce) Presents in form of small savings .accounts are. . ...
districted to the parents of new-born children to
induce future saying. In 1*65 "thus 86(5,00* savings
accounts with 3-9 million marks were opened.
I*
Page 9
(dd) Saving is combined with a.lottery* • ..Ifearly9-. f° of : .-
*'■' .',"■• ■ the population take part in this system*; ■ : - \' "': "
(ee) Savings olubs are stimulated. 180 million marks were
■ -.; thus collected in 1$6$* ■ '■ ' ■ ; ' '
(ff) Special types of saving are propagated; e.g. for; ■ ■ r '-'.■ housing, for marriages for young handicraftsmen*
{<?) Th$ SaVings: Banks'Intimation ; '■■'.■■•''':''..".:'
; (a) The Munipipal Savings Banks are historically an example for
^development from "below". .She result, is decentralisation' of
i Tml-tfiess "policy* ...
■ ^;V'-'^c-.S ■- - .- ■ ■ ■■ -1 ■ ■■ .. ■ ■ ■ ■-,, -■■;; " .■
At..the end: of the-IJth. century-the icLea\ef...concentration
; . adminiBtrators.; 'Phey. began by forming regional Associations
^ii; of HiniOi^e^ Savings,Banks, . ' . . ■ .
!]?oday all German Savings Banks are members qf, the ■■•■■v \,..;■;' ,v;*
German Savings Banks and Clearing*Association "With : ■
divisions on a regional, basis* . ■•_.■....' .
Its functions ares ■'<'■■■■■.■:■■■.■:■ \-\r ■-. / -;■■"■ ^■'..■■^V;:-*. ; ' ■'■, ;
Consul1 tatibn? exchange of experience, cooperation,
g of staff 3 auditing member-Savings Banks.: ;
of staff is effected "by special courses
in tfee 'municipai" Gaining centers. For further training
of leading.staff'serves the ^Institute" for Municipal ■ Savings Banks and Credits in Bonn;-'-' ,
% the initiative of the Savings Banks Assd-cxatioh regional
clearing banfcs"- Central iGirb'lnstliiiuiii68 ("Giroaehtraien") «
have been set up. "-"'■"■''-: :
Today l^.^gional.,cXearing banks of this type are.operating in .the ■ Federal Republic of GerBiany. Initially toward the! end of: the 15th century they were-:-iformed as a system fox monetary transfers between savings banks. Now they have all the function*
of central banks for the locally bound savings l)anks. :
The.Central Giro Institutes are the cgmpensating,factor for the decentralising element in the sayings "banks setup for -seouring a certain .adjustment and a unified business policy.
(c) Central tiiro Institutes .are "bodies corporate,iunder; Pubi:i.p Law..: As.regards^eir. liabilities* there .exists!;. - ,;./:|
f: two gain types: of. Central Giro Institutes:-. ;■ -;...;,- ■■''$ ; (aa) The regional Associations of Municipal Savings Banks ;
are guarantees and legal entities for.: the. respective ;^.;'T-
Central Giro Institutes (Baden, Wurttemberg* Bavaria) •'
£bbj The Central Giro Institutes are covered "by the ."-, !-.
Association of Municipal Savings Banks together , with the Central State Government (Land) 9 nojra»4tj
" in a proportion of 50*5O-.' Fundamentally it Is^a '
focwn of co-operation between Loca^and Central Government
I--;.:;;■ ■.: in the sphere of: "banking (in ■Schleswig^Holstein,
Saxony, Uorth-Bhine-¥estfalia, Hessen,
The jffgans of Central Giro Institutes usually -are: the:
Managing Board.*; th©. Supe;rvia,6ry Board and. the, General ■ -..
Meeting* . ■ ' -:" : '■' .'■'■
(e) The functions of Central Giro Institutes ares ■ (aa) Transfers within the-Savings Banks System, ....,■
(ob) Administration of liquid assets .of the Savings.Bankst (cc) Granting of credits to Savings Banks whose funds are
.. next, adequate to satisfying local C3?edi,t requests^ ,;
(dd) Joint credits to Savings Banks clients, whose
credit requirements are tooheavy, for one Savings .
„ • Bank alone, :
X •'.'.'■ ■ ■■' ■■.■■■' ' '' . ' - ■ ■ ■ . ■
{ee) Short-term advances and long and medium-term
credits to municipalities, . - .. ■
(ff) Issue of municipal bonds and debentures. This
■>■'."' activity benefits especially; the" smaller muni*
*■"■'■' ''"'■ rcipaiities;wiib have diifficuities in placing their
Xoans;in the1' rniarket* """ ■•" ' .'" ': '" : ;'" :' ;"
Page'.11
(gg) Main institute for the administration of Govern
ment "sectoral loans"*(f) The central institute on the Federal level for all Central Giro Institutes is the "German Giro Centre -
German Minicipal Bank" in Frankfurt, founded in 1918
and reopened in 1954? It operates in tlje same fieli as the regional Central Giro Institutes?{g)'*'M the 'end of 19&5 the total "balance of the Central Giro Institutes amounted to 60 "billion marks* Ag!
Ixang^tsrm credits 15 "billion marks were, granted to
nwhicipalities (25 f° of the balanoe)*
The,German Jflunicipal Bank shows a balanoe of
"billion marks.
^■>-^^aar^^tB^Sg^%' ^-f^^^a^^^^-^V'^^fei^j^j^^^i.iaa
Page 12
.~, /The;-German, .Savings ,Banks Organisation
Associationsfr :,...,...;' .... ..'L- : ■ ■' - Banks:-.
-.. ,.:;■:,: \v;::: &■ , ■.-,_: •■ ".
;'" ■■"*■'; '■■■Federal. ■ '- '' i
J - •*■.■•'■"':/■ Level ■"• '■ -; ■'■'
German Savings Baftks and Clearing Association, '; -
Bonn.
German Gir o C entre . >
■i-. German .Municipal-.Bank;.-
B Begional
Level
12
Regional Savings Banks and Clearing Associations
Regional
^ Central Giro Institutes.
C Local Level
