"Volks- und Raiffeisenbank Bad Salzungen Schmalkalden on the Brink?"
The financial year hasn't even wrapped up, but Volks- und Raiffeisenbank Bad Salzungen Schmalkalden might be in for some rough waters. With millions in losses anticipated due to real estate value adjustments, the bank's advisor, lawyer Edgar Steinle, believes that the protective fund will have to step in soon. Steinle, who advises the Supervisory Board of the Thuringian bank, believes movement on this issue is imminent.
According to Steinle, the anticipated single-digit million-euro loss is likely the result of fluctuations in the real estate market. The bank declined to comment on the matter. Although the annual results for 2022 are still being audited and the financial statements haven't been certified yet, the writing seems to be on the wall.
Remember when Volks- und Raiffeisenbank Bad Salzungen Schmalkalden made headlines for its association with former national soccer player Stefan Effenberg? Well, the bank is generating headlines for somewhat different reasons now. Recently, the bank's longstanding CEO, Stefan Siebert, resigned, and insiders suggest that the current CEO, Jan Wettstein, has also stepped down.
BAFIN, the German Federal Financial Supervisory Authority, has been embroiled in a dispute with the bank for quite some time. Sources claim that BAFIN recently demanded that the bank significantly boost its equity capital, a move meant to strengthen its financial health. BAFIN did not comment on the matter.
In the event that the protective fund steps in to assist the bank, it's possible that Volks-und Raiffeisenbank Bad Salzungen Schmalkalden could find itself in merger talks with a neighboring Volksbank. Steinle confirmed that exploratory merger talks were a possibility. The Federal Association of German Cooperative Banks (BVR) declined to comment on the matter.
The cooperative bank system in Germany, of which Volks- und Raiffeisenbank Bad Salzungen Schmalkalden is a part, holds a significant stake in the real estate market. Commercial real estate loans account for a sizeable portion of the bank's portfolios. As a result, banks like Volks- und Raiffeisenbank Bad Salzungen Schmalkalden could be vulnerable to fluctuations in the real estate market.
While deposit insurance schemes provide protection to retail customers up to a certain limit, the specific protection scheme for cooperative banks in Germany, like the Entschädigungseinrichtung der Volks- und Raiffeisenbanken, may offer additional guarantees. The details of such funds and their intervention mechanisms in the event of real estate losses, however, are not explicitly stated in the available data.
As with any financial situation, a clear picture can only be painted with the full suite of details. With only thin details available from the bank and regulatory bodies, the exact impact of real estate market fluctuations on Volks- und Raiffeisenbank Bad Salzungen Schmalkalden remains unclear.
Enrichment Data Integrated: German banks, including cooperative banks, are exposed to commercial real estate loans. The non-performing loan ratio for these loans has risen, particularly among special investment institutions (SIs) due to their high exposure to US commercial real estate. Banks have increased risk provisioning for their commercial real estate loan portfolios to mitigate these risks. By 2025 and 2026, over 100 billion euros in follow-up financing for existing commercial real estate loans could potentially strain the financial health of banks further if interest rates remain high or property demand decreases. Deposit insurance schemes in the European Union provide protection to retail customers up to a certain amount, but their scope does not cover wholesale customers or always provide guarantees beyond the minimum. The Entschädigungseinrichtung der Volks- und Raiffeisenbanken, a specific protection scheme for cooperative banks in Germany, offers additional guarantees but their intervention mechanisms in the event of real estate losses are not explicitly stated.
