What protects your money in Germany: deposit guarantee, investor compensation, Sondervermögen and what is not covered
Map every euro you hold to the protection layer that applies to it: statutory deposit guarantee, voluntary bank schemes, investor compensation, segregated fund assets, or nothing at all.
What you will learn
- The four protection layers in Germany and the limits of each.
- Why a deposit, an ETF unit and a certificate are protected in different ways.
- Which popular products have no protection scheme, and how to audit your own accounts.
Explanation
Germany has several separate safety nets, each covering a narrow set of claims; fraud and insolvency exploit the gaps. Basics were covered in Personal Finance (lesson pf05) and the ETF course (lesson etf02); here we apply all layers to a whole portfolio.
Layer 1: statutory deposit guarantee
Under the Deposit Guarantee Act (Einlagensicherungsgesetz, EinSiG), which implements the EU directive, every bank licensed in Germany must belong to a scheme that repays deposits up to €100,000 per depositor per bank. Deposits are credit balances such as Tagesgeld and Festgeld. The limit is per person and per bank, not per account; a joint account of two people gets €200,000. For temporary high balances from defined life events (home sale, inheritance, divorce, severance, retirement) the limit rises to €500,000 for six months. Payout starts within seven working days after the supervisor BaFin (Bundesanstalt für Finanzdienstleistungsaufsicht) declares the compensation case. Private banks are covered by the Entschädigungseinrichtung deutscher Banken (EdB); Sparkassen and cooperative banks run institutional protection schemes that rescue the bank itself. EU branches are covered by their home-country scheme, also at €100,000.
Layer 2: voluntary bank schemes (no legal claim)
Many private banks also belong to the voluntary Einlagensicherungsfonds of the Bundesverband deutscher Banken, which tops up protection far above €100,000, but there is no legal entitlement to payment and the ceilings have been cut in steps: as of 2026 €3 million per private individual and bank, falling to €1 million from 2030. Check the current statute.
Layer 3: investor compensation
If a bank or investment firm cannot return your securities or the cash from securities transactions, the Investor Compensation Act (Anlegerentschädigungsgesetz) provides 90 % of the claim up to €20,000 (via the EdB for banks, via the EdW for pure investment firms). It covers the case that your broker cannot hand back what it holds for you, typically after fraud inside the firm. It never covers price losses, and payouts can take years.
Layer 4: segregation
The strongest protection is ownership. Shares, bonds and ETF units in your Depot remain your property under the Securities Deposit Act (Depotgesetz); if the broker fails, the positions are separated from its estate and transferred to another custodian. Fund assets are additionally Sondervermögen (special assets) under the Capital Investment Code (Kapitalanlagegesetzbuch, KAGB), separated from the fund company and the depositary. Cash at a neobroker usually sits in trust accounts at partner banks, so that bank's €100,000 guarantee applies per depositor.
What is not covered
| Product | Legal nature | Protection if the provider fails |
|---|---|---|
| Certificates, ETCs, ETNs, structured bonds | Debt of the issuer | None; you are an unsecured creditor (Lehman 2008) |
| Nachrangdarlehen, Genussrechte, direct investments | Subordinated claim | None; ranks behind all other creditors |
| Crypto held at an exchange | Contractual claim | No compensation scheme; the EU Markets in Crypto-Assets Regulation (MiCA) requires segregation but does not insure you |
Worked example
Hypothetical example: Lena holds €140,000 Tagesgeld at Bank A, €30,000 in a certificate issued by Bank A, €200,000 in ETF units in her Depot at Bank A, €60,000 cash at a neobroker (held at partner Bank B) and €15,000 of crypto at an exchange. Assume no voluntary fund applies and unsecured claims on Bank A recover 20 %; fees and taxes are ignored. Bank A fails.
- Tagesgeld: €100,000 repaid. Uncovered: €140,000 − €100,000 = €40,000; 20 % recovery returns €8,000, loss €32,000.
- Certificate: issuer debt, no guarantee. Recovery 20 % × €30,000 = €6,000, loss €24,000.
- ETF units: her property, transferred to another custodian. Loss: €0 (market risk continues).
- Cash at Bank B: unaffected, and inside Bank B's own €100,000 limit.
- Crypto: unaffected by Bank A, but if the exchange failed there would be no scheme at all.
Loss: €32,000 + €24,000 = €56,000. Two cheap fixes: move €40,000 to a second bank (or use a joint account, limit €200,000) and avoid certificates issued by the bank that holds her deposits.
Common mistake
Practice activity
On paper, list every account and product you own with its legal nature (deposit, security in custody, fund unit, issuer debt, subordinated claim, crypto claim), the protection layer with its limit, and the uncovered amount. Then solve: Family Kaya holds €180,000 Tagesgeld in a joint account of two spouses at one bank, €25,000 in a gold ETC issued by that bank, and €90,000 in a UCITS ETF (hypothetical). How much is uncovered if the bank fails and unsecured claims recover 0 %?
Show solution
Joint account: 2 × €100,000 = €200,000 limit, so €180,000 is fully covered. Gold ETC: issuer debt, uncovered €25,000, loss €25,000. ETF: Sondervermögen in custody, uncovered €0. Total uncovered exposure: €25,000. Fix: choose an ETC from an unrelated issuer, or size the issuer risk consciously. Limitations: real recoveries are uncertain and slow; the €500,000 rule and voluntary funds were ignored.
Key takeaways
- Deposits: €100,000 per person per bank by law (€500,000 for six months after defined life events); voluntary funds add more without a legal claim.
- Securities and fund units are your property; segregation, not a compensation fund, protects them.
- Investor compensation is only 90 % up to €20,000 and only for assets the firm cannot return.
- Certificates, subordinated loans, crypto balances and unlicensed providers (including prop firms) have no safety net.
Next step
Next: the rules that govern how products may be sold to you, from MiFID II tests and product intervention to prospectus duties and the grey capital market.
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