Economy and Banking Sector of Germany

Germany is a prosperous, democratic country with a highly skilled labour force, a large capital stock, a low level of corruption, and a high level of innovation.

Being an innovation-driven economy, Germany is among the world's largest and technologically advanced producers of chemicals, machinery, vehicles, machine tools, electronics, automobiles, food and beverages, textiles.

The history of banking in Germany dates back to the 15th century. The oldest bank still operating in Germany, is Berenberg Bank, founded in 1590. Nowadays Germany has "three-pillar banking system" consisting of private banks, cooperative banks and public savings banks.

Location Central Europe
Population (2016)82 162 000 ↑ (+0.01%)
EU Status member since 1952
Economy
National Currency EUR (Euro) since 1 January 1999
GDP 
    Nominal GDP (2015)3 026.6 bln EUR ↑ (+0.04%)
    Nominal GDP per Capita (2015)37 100 EUR ↑ (+0.05%)
    Real GDP Growth (2015)1.7 % ↑ (2014: 1.5 %)
Inflation Rate 
    CPI, MoM (Sep 2016)0.0 % ↑ (Aug 2016: -0.1 %)
    CPI, YoY (Sep 2016)0.5 % ↑ (Aug 2016: 0.3 %)
    CPI, Year Average (2015)0.1 % ↓ (2014: 0.8 %)
Unemployment Rate (2015)4.6 % ↓ (2014: 5.0 %)
Government Bond Yield (Sep 2016)-0.09 % ↑ (Aug 2016: -0.13 %)
Credit Ratings (as of Sep 2016)
    FitchAAA highest credit quality, outlook stable
    Moody'sAaa prime, outlook stable
    S&PAAA prime
Taxation
Withholding Tax 0.0 - 26.0%
Double Taxation Agreements 96 signed agreements
Information Exchange 
    Exchange on Request 22 signed agreements
    Automatic Exchange starts in September 2017
FATCA IGA in effect since 31 May 2013, Model 1
Banking Sector
Financial Market Development 4.9 (max 7.0) rank: 20th out of 138 countries
    Banks' Soundness 5.4 (max 7.0) rank: 45th out of 138 countries
Banking Industry Country Risk 2(1 - lowest risk, 10 - highest risk)
    Economy Risk 1
    Industry Risk 3
Deposit Guarantee Scheme 
    Maximum Protected Amount 100 000 EUR
Country Ceiling for Deposits 
    Local Currency (Euro)Aaa prime
    Foreign CurrencyAaa prime
Deposit Rates (Aug 2016, EUR)0.33 % ↑ (Jul 2016: 0.27 %)
Banking Sector Structure 
    Number of Banks1727
    Recent Changes (2015) new banks: 5, closed banks: 39
    Consolidated Assets (2015) 6 954.90 bln EUR ↓ (-1.52%)
Major Banks
 Commerzbank AG  Bayerische Landesbank
 Deutsche Bank AG  Norddeutsche Landesbank GZ
 UniCredit Bank AG  HSH Nordbank AG
 Landesbank Baden-Württemberg
 List of Banks in Germany

German Economy

National Currency

Germany joined the Euro Area on 1 January 1999.

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GDP

According to Eurostat, nominal GDP of Germany in 2015 was 3 026.6 bln EUR.

Germany underperforms the European Union in terms of real GDP growth with the average annual differential coming to -0.1% over the past 10 years (2005 - 2015). In 2015 real GDP growth was 1.7% which was above the Euro Area average (1.6%) and below the European Union average (1.9%). Real GDP growth in 2016 - 2021 are IMF's estimates.

Real GDP Growth in Germany.
Chart 1. Real GDP Growth in Germany. Source: Eurostat, International Monetary Fund.

In 2015, nominal GDP per capita in Germany was 37 100 EUR.

Germany has an above-average level of wealth in terms of per-capita GDP at purchasing power parity (PPP); this economic welfare indicator has, on average, exceeded that of the European Union by 20.5% over the past 10 years (2005 - 2015). GDP per capita at PPP in 2016 - 2021 are IMF's estimates.

GDP Per Capita at Purchasing Power Parity in  Germany; European Union = 100.
Chart 2. GDP Per Capita at Purchasing Power Parity in Germany; European Union = 100.
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Inflation Rate

According to Eurostat, inflation rate in Germany in 2015 expressed as annual percentages of average consumer prices was 0.1% which was above the Euro Area average (0.0%) and above the European Union average (0.0%). Inflation rates in 2016 - 2021 are IMF's estimates.

Inflation Rate in Germany.
Chart 3. Inflation Rate in Germany. Source: Eurostat, International Monetary Fund.
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Taxation in Germany

Withholding Tax

Withholding taxes are imposed at source of income and are often applied to dividends, interest, royalties, rent and similar payments. The rates of withholding tax are often reduced by double taxation agreements.

Withholding tax rates applied on payments of interest and dividends in Germany are shown in Table 1.

Dividends Interest
Natural person, resident 26.026.0
Natural person, non-resident 26.00.0
Table 1. Withholding tax rates in Germany.
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Double Taxation Agreements

Double Taxation Agreement (DTA) is an agreement between two or more countries for the avoidance of double taxation.

Germany signed DTAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Albania
 Algeria
 Argentina
 Armenia
 Australia
 Austria
 Azerbaijan
 Bangladesh
 Belarus
 Belgium
 Bolivia
 Bosnia and Herzegovina
 Bulgaria
 Canada
 China
 Cote D'Ivoire
 Croatia
 Cyprus
 Czech Republic
 Denmark
 Ecuador
 Egypt
 Estonia
 Finland
 France
 Georgia
 Ghana
 Greece
 Hungary
 Iceland
 India
 Indonesia
 Iran, Islamic Republic of
 Ireland
 Israel
 Italy
 Jamaica
 Japan
 Kazakhstan
 Kenya
 Korea, Republic of
 Kuwait
 Kyrgyzstan
 Latvia
 Liberia
 Liechtenstein
 Lithuania
 Luxembourg (Sep 2013)
 Macedonia
 Malaysia
 Malta
 Mauritius
 Mexico
 Moldova, Republic of
 Mongolia
 Morocco
 Namibia
 Netherlands
 New Zealand
 Norway
 Pakistan
 Philippines
 Poland
 Portugal
 Romania
 Russian Federation
 Serbia
 Singapore
 Slovakia
 Slovenia
 South Africa
 Spain
 Sri Lanka
 Sweden
 Switzerland
 Syrian Arab Republic
 Tajikistan
 Thailand
 Trinidad and Tobago
 Tunisia
 Turkey
 Turkmenistan
 Ukraine
 United Arab Emirates
 United Kingdom
 United States
 Uruguay
 Uzbekistan
 Venezuela
 Vietnam
 Zambia
 Zimbabwe

There are also several agreements between Germany and other jurisdictions which were signed but haven't yet come into force (for agreements signed after after 01 January 2013 of signing the agreement is given in brackets):

 China (Mar 2014)
 Netherlands
 Oman
 South Africa
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Information Exchange

There are 3 ways for jusrisdictions to exchange information on tax matters:

  • spontaneously;
  • on request;
  • automatically.

Tax Information Exchange Agreements (TIEAs) enable exchange of information on request relating to a specific tax investigation, either criminal or civil.

Germany signed TIEAs which already came info force with the following jurisdictions (for agreements which came into force after 01 January 2013 the date of coming into force is given in brackets):

 Andorra
 Anguilla
 Antigua and Barbuda
 Bahamas
 Bermuda
 British Virgin Islands
 Cayman Islands
 Gibraltar
 Guernsey
 Isle of Man
 Jersey
 Liechtenstein
 Monaco
 Montserrat
 Saint Lucia (Feb 2013)
 Saint Vincent and The Grenadines
 San Marino
 Turks and Caicos Islands

There are also several agreements between Germany and other jurisdictions which was signed but haven't yet come into force (for agreements signed after 01 January 2013 of signing the agreement is given in brackets):

 Cook Islands
 Dominica
 Grenada
 Saint Kitts and Nevis

Automatic information exchange allows jurisdictions to exchange information automatically, without having a specific tax investigation.

Germany signed the automatic information exchange agreement on 29 October 2014 and committed to start the automatic information exchange in September 2017.

Further Information:
Automatic Exchange of Information on Financial Accounts
Countries Which Will Not Automatically Exchange Account Information

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FATCA

Foreign Account Tax Compliance Act (FATCA) which became law in the United States in March 2010, focuses on reporting made by foreign financial institutions about financial accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest. The FATCA-reporting is facilitated by Intergovernmental Agreements (IGAs).

Germany has FATCA agreement with the U.S. in effect since 31 May 2013 (Intergovernmental Agreement Model 1). Financial institutions operating in Germany are required to identify U.S. taxpayers by January 1, 2017 and to report the information for 2017 and the subsequent years. The agreement is reciprocal: German financial accounts hold in U.S. financial institutions will be reported to German authorities.

Further Information:
FATCA and European countries

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German Banking Sector

Financial Market Development

According to World Economic Forum's Global Competitiveness Report 2016-2017, financial market development in Germany is scored 4.9 out of maximum 7.0 and ranked 20th out of 138 analysed economies. Soundness of banks is scored 5.4 bringing Germany into the 45th place, trustworthiness and confidence of financial market is scored 4.9 (32nd place).

Financial Market Development in Germany.
Chart 4. Financial Market Development in Germany. Source: WEF.
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Banking Industry Country Risk

Banking Industry Country Risk Assessment (BICRA) is a methodology designed by Standard&Poor's "to evaluate and compare global banking systems". A BICRA is scored on a scale from 1 to 10, ranging from the lowest-risk banking systems (group 1) to the highest-risk (group 10). The BICRA methodology has two main analytical components: "economic risk" and "industry risk". Each of the components is then further divided into 3 "factors" that result in an economic and industry risk score for each country.

Germany is included into group '2' with economic risk scored '1' and industry risk scored '3'.

BICRA Group 2
Economic risk 1
    Economic resilience very low
     Economic imbalances very low
    Credit risk in economy low
Industry risk 3
    Institutional framework intermediate
    Competitive dynamics intermediate
    Systemwide funding very low
Government support assessment supportive

Table 2. BICRA for Germany. Source: S&P's.

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Deposit Guarantee Scheme

Deposit Guarantee Schemes compensate certain deposits held by depositors of a bank that becomes unable to meet its obligations.

From a depositor's point of view it is important to know:

  • if the depositor is eligible within the terms of the deposit guarantee scheme;
  • if the depositor's bank is a participant in the deposit guarantee scheme;
  • if the depositor's type of deposit is covered by the deposit guarantee scheme.

All these details about deposit guarantee scheme in Germany are summarised in Table 3.

Scheme Participantsall credit institutions operating in Germany, branches of non-EEA banks, branches of German banks abroad
Scheme Exemptionsbranches of EEA-banks (covered by their home countries)
Covered Accountsall deposit accounts (deposits on current accounts and savings accounts, overnight money or time deposits, registered savings bonds, and similar)
Covered CurrenciesEU currencies
Maximum Protected Amount100 000 EUR
Paid In CurrencyEUR

Table 3. Deposit guarantee scheme in Germany.

EEA stands for European Economic Area and consists of all EU member states plus Liechtenstein, Norway and Iceland.

EU currencies are all official currencies of EU Member States.

So, only the deposits made with German banks in the following currencies are covered by the deposit guarantee scheme of Germany

 EUREuro
 BGNBulgarian lev
 HRKCroatian kuna
 CZKCzech koruna
 DKKDanish krone
 HUFHungarian forint
 PLNPolish złoty
 RONRomanian new leu
 SEKSwedish krona/kronor
 GBPPound sterling

It should be also noted that deposits made in non-EU currencies (for example, CHF, USD and JPY) are not covered by the German deposit guarantee scheme.

Further Information:
Deposit Guarantee Schemes in Europe

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Country Ceiling for Deposits

Moody's country ceilings for deposits specify the highest rating that can be assigned to local- or foreign- currency denominated deposit obligations of a bank or other deposit taking institution domiciled within that country.

Local currency (Euro) deposit ceiling for Germany is set to Aaa (prime), foreign currency deposit ceiling is Aaa (prime).

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Deposit Rates

In Aug 2016, an agreed annualised deposit rate in local currency (Euro) of new contracts with agreed maturity up to 1 year between credit institutions and households was 0.33% which was below the Euro Area average (0.53%).

Deposit Rates in Germany.
Chart 5. Deposit Rates in Germany. Source: ECB.

Further Information:
Compare Bank Deposits in Germany

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Banking Sector Structure

Currently there are 1727 credit institutions operating in Germany.

Recent structural changes (2013 - 2015) of the banking sector of Germany are summarised in Table 4.

201320142015
Number of Opened Banks585
Number of Closed Banks274039

Table 4. Recent structural changes in the banking sector of Germany.

All the credit institutions operating in Germany can be classified into several categories. Table 5 summarises the number of banks in each category.

CategoryNumber of Banks
Banks187
Branches of foreign banks107
Central banks1
Cooperative banks989
Private banks (Bankhäuser)20
Private building and loan associations (Private Bausparkassen)12
Public sector building and loan associations (Landesbausparkassen)8
Savings banks (Sparkassen)403

Table 5. Number of banks by category in Germany.

The list of the most recently opened banks in Germany is provided in Table 6.

There are 107 branches of foreign banks from 24 different countries in Germany. Table 7 shows 10 countries having the biggest number of branches in Germany.

Country of OriginNumber of Branches
 United Kingdom18
 France16
 Netherlands12
 Austria12
 China5
 Sweden5
 Italy4
 Ireland4
 Luxembourg4
 Belgium3

Table 7. Number of branches of foreign banks in Germany grouped by country of origin.

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