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FINANCIAL CRISIS

Commerzbank applies for state aid

Commerzbank, the second-largest German bank, said on Monday it would benefit from €8.2 billion and €15 billion more in debt guarantees – becoming the second major financial institution to apply for state aid after the financial crisis.

Published: 3 November 2008 08:49 CET
Commerzbank applies for state aid
Photo: DPA

The bank also posted a third-quarter net loss of €285 million and an operating loss of €475 million.

“In truth, we have not covered ourselves in glory here. In future, we will have to improve,” chairman Martin Blessing said in a statement.

The international financial crisis cost the bank €1.1 billion in losses from market operations, the statement added.

Commerzbank responded to pressure from German authorities for banks to apply for aid under a rescue package that includes up to €80 billion in capital injections and €400 billion in loan guarantees.

The capital infusion will take the form of a “silent participation,” which means Berlin will not become an active shareholder in Commerzbank, and the cash will go directly towards boosting the bank’s so-called Tier1, or core capital.

That means investors’ holdings will not be diluted in Commerzbank, which can also use a capital increase as it is acquiring Dresdner Bank from the insurance group Allianz.

“We have decided to make use of the package because this is good for the bank, its employees and its clients,” Blessing said.

“As of today there is not current need for any guarantees. However, they offer additional and attractive refinancing options, in case markets should deteriorate again.”

Commerzbank said it had increased loan loss provisions to €628 million from €414 million, a sign the bank expects more turbulence in the future.

Commerzbank shares have lost one third of their stock market value in a month.

In accepting state aid, Commerzbank agreed to forego paying a dividend in 2009 and 2010 and its directors will see their salaries capped at €500,000 per year.

Despite insistent calls from German authorities, the only other private bank to ask for the assistance is property specialist Hypo Real Estate, which asked the state last week to back loans it gets from other banks over the next three years.

Deutsche Bank boss Josef Ackermann told German television late Sunday that the biggest private German bank was “strong” enough to do without state aid.

BANKING

Card over cash? Why Germany is seeing a new payment preference

Cash has long been king in Germany, with many smaller retailers refusing to join the rest of the world in adopting contactless payment systems. But card-based payments are on the rise, as recent stats about Girocard use reveal.

Published: 13 February 2024 12:31 CET
Card over cash? Why Germany is seeing a new payment preference

Germany has long been a very cash-based country, occasionally to the dismay of frustrated tourists at the Döner shop.

A few German phrases express the people’s love of physical money. There’s ‘only cash is true’ – Nur Bares ist Wahres. Or Bargeld lacht, literally meaning cash laughs, but used to imply that cash is what’s wanted, similar to ‘cash is king’ in English.

But the classic German preference for cash appears to be evolving, as the use of girocards is growing, even for small transactions.

How are girocards being used?

Girocard, an ATM and debit card service offered by German Banks, was designed to allow customers to use virtually all German ATMs and, increasingly, to make purchases at businesses.

READ ALSO: Ask an expert – Why is cash still so popular in Germany, and is it changing?

Last year, consumers in Germany used their Girocard more often than ever before for cashless payments. A total of €7.48 billion payment transactions with the plastic card were counted – 11.5 percent more than in the previous record year 2022, according to figures published by the Frankfurt-based institution Euro Card Systems.

Whether at the bakery, petrol station or supermarket, customers are increasingly pulling out their cards at the checkout, even for smaller amounts. As a result, the average amount paid with the Girocard fell from €42.34 to €40.69 within a year. 

The rise of card payments in Germany

Contactless payment, which is possible with girocards and credit cards that have an NFC chip, got a boost during the Covid pandemic, as retailers promoted it for hygiene reasons. 

But the use of card payments has continued to grow in Germany since then, boosted partly by the increasing use of girocards.

Promoting the use of girocards, some German banks have expanded their cards’ functions: Sparkassen, Volksbanken, or Raiffeisenbanken offer girocards for the digital wallet, for example.

Banks want to continue upgrading the payment card with further applications. For example, a project is being tested which would add an age verification function to girocards that would be useful when a customer is buying cigarettes.

On the retail side, it’s clear why the Girocard is preferred to other debit options.

“We see that debit cards from international providers cost up to four times more,” Ulrich Binnebößel, Head of the Payment Systems & Logistics Department at the German Retail Association (HDE) told DPA.

What’s the difference between the Girocard and other debit?

The Girocard is a strictly German phenomenon. It can be seen as the latest iteration of the EC card, which was created to consolidate payment systems following the unification of former East and West Germany.

In 1991 different debit card systems, including Eurocheque guarantee cards from former West Germany and Geldkarte ATMs from former East Germany, were unified into Eurocheque cards.

Then in 2001, the Eurocheque system was disbanded, but German banks continued to use the EC logo for “electronic cash’” cards, or EC cards. In 2007, the German Banking Industry Committee introduced Girocard as a common name for electronic cash and the German ATM network.

Girocards are only issued and accepted in Germany, so if you want to get one of your own, you’ll have to join a German bank, and shell out those notorious German banking fees.

READ ALSO: Why it’s almost impossible to find a free bank account in Germany

Alternatively, you can get by with internationally accepted debit cards provided by a bank in your home country, or otherwise by joining an app-based European banking service like N26. 

But be warned, without the Girocard in hand, at some smaller retailers you may be told, “Leider nur Bargeld oder EC-Karte.”

With reporting by DPA

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