How safe is my money?
Why are some people so nervous right now?
Vmany thousands of kilometers from Germany, in America’s Silicon Valley, the current crisis began. There, a bank that hardly anyone knew before went bankrupt: the Silicon Valley Bank. Her customers were start-ups from all over the world. The bank had invested their deposits in long-term government bonds, which have fallen sharply in value in recent months. Many anxious customers withdrew their money at the same time, the bank stumbled and ended up insolvent. The fear that other banks have a similar construct spread worldwide. The next shock followed a few days later: The President of the Saudi National Bank, the major shareholder of the CreditSuisse said in an interview that he did not want to inject any more money into Credit Suisse. Credit Suisse has been struggling with problems for months, and in the already nervous market, the share price rattled down according to this statement. Individually, the cases in the US and Switzerland have nothing to do with each other. But what unites them is that they have severely damaged investor confidence. They fear further bankruptcies and are reminded of the beginnings of the 2008 financial crisis.
Is the money in my account at risk?
There are currently no signs that a German bank could get into major difficulties. And even if a bank goes bankrupt, customers’ money is protected by statutory deposit insurance. For up to 100,000 euros, this protection applies to individuals within the European Union. For married couples with a joint account, it is up to 200,000 euros. This protection applies per bank and includes current accounts, call money and time deposits. Some German banks advertise that higher amounts are also protected – namely via the voluntary deposit protection fund of the Association of German Banks. Savings banks and cooperative banks also promise to support each other in emergencies. “Consumers should not necessarily rely on such promises,” says Niels Nauhauser from the Baden-Württemberg consumer advice center. Savers should definitely split amounts of more than 100,000 euros between several institutes. The following applies to stocks, bonds and investment funds: the bank only keeps them in custody. However, they belong to the investor and are a so-called special asset on the bank’s balance sheet. That means: If the bank goes bankrupt, shares & Co. do not belong to the insolvency estate. Affected customers can then have their investments transferred to a custody account at a new bank.
How safe is it if I have money abroad?
In principle, deposit protection applies in all member states of the European Union. The money should be secured. Consumer advocate Niels Nauhauser still advises caution. In the event of a bank failure, the payment is made via the national security systems, so the savers are dependent on the respective country. “Anyone who wants the highest level of security should only invest their money with institutions that are protected by the German statutory deposit insurance system,” says Nauhauser. Savers can find out which banks these are on the website of the compensation scheme for German banks.
Should I rather sell my shares? Or is now a good time to start?
Fear is never a good advisor. “The biggest mistake would be to sell everything in a panic now,” says Andreas Hackethal, finance professor at the Leibniz Institute Safe in Frankfurt. No one can predict how prices will develop in the coming weeks. And finding the right time to get back into it is almost impossible. “Even if you only miss a few days, you can lose a lot of returns,” says Hackethal. The following figures illustrate this: Suppose someone has invested in American stocks over the past 30 years and missed the best 40 trading days. Then this investor ends up with an average annual return of almost zero. Those who stayed, on the other hand, received around 8 percent annually. Restructuring the portfolio frantically can have fatal consequences. It is better to sit out crises. Or even perceive the low prices as an opportunity. “Anyone who invests for the long term and can withstand fluctuations can definitely strike,” says Henning Gebhardt, investor and capital market expert. But shareholders of banks could need strong nerves. Depending on what happens in the coming weeks, stocks may continue to trade higher or lower. In addition to Credit Suisse, the prices of many other banks have also suffered greatly. Betting on a single sector is never a good idea. It is important to spread your own wealth across many sectors and countries.