Abstract

Banking-policy Standards and their Effects on Banking Operations

Protection of the depositor is among the primary banking-policy aims that can be pursued by the legislator. Up to now in the Federal Republic of Germany solvency protection has been the means of indirect depositor protection practised by the credit institutions. 'The basis for this was and still is formed mainly by the risk-related standards of the law on credit affairs (KWG; $ 10 et seq.) and the subsequent standards issued by the Federal Supervisory Board for Credit Affairs (Bundesaufsichtsamt für das Kredit wesen). Ihe author has shown in this magazine* that indirect depositor protection effected by means of solvency protection should exhaust all possibilities which would result in the credit institutions being able to call on sufficient funds to meet all depositors’ demands, even in the case of a run on the bank - induced by either credit losses, other financial losses of the bank or rumours of losses. The only attempt to have been made on this problem on any comprehensive scale to date is the so-called “depositor protection balance” by Wolfgang Stützel. As a result of the spectacular bank losses of 1974 the idea of direct depositor protection by means of deposit protection systems now plays a more important role than ever before in discussions on banking policy. If it should prove possible to introduce an efficient group deposit protection system for the banking business as a whole or deposit protection systems of the individual groups of institutions (the latter is just being put into effect) a new situation would arise with regard to the solvency protection standards of the law on credit affairs. The risk cover standards of the law on credit affairs (KWG) need in that case - provided the deposit protection systems are really efficient - no longer be designed for the case of a run. They then take on the characteristics of standards of good conduct for the members of the deposit protection systems. In the above essay the author discusses the basic conditions for the efficiency of a group protection system. He goes on to develop certain principles whereby the standards for the law on credit affairs (KWG) may be reformulated as good conduct regulations relating to the credit institutions whose depositors are protected by means of a direct deposit protection system. When formulating such standards three groups of problems are encountered: - the adequate determination of facts relevant to the protection system; - the adequate connection of facts relevant to the protection system; - the determination of the protection level as a measure of the “representative risk aversion” of the legislator transposed into the standards. In the last part of the essay the effects of banking-policy standards and their changes are discussed.