Struggling Volksbank in Thuringia at risk of financial loss, government aid may be needed
Recent reports suggest that Volksbank Bad Salzungen Schmalkalden, based in southern Thuringia, might require assistance from the German cooperative banks' guarantee fund. This assertion comes from legal representative Edgar Steinle, who revealed preliminary figures indicating a five million euro loss for the bank in 2022. The losses are primarily attributed to value adjustments, encompassing real estate and investment valuations.
While the loss figures are tentative, they point towards the need for external support. To put it into perspective, Volksbank Bad Salzungen Schmalkalden counts around 250 employees and serves close to 51,000 customers, with assets totalling roughly 1.5 billion euros.
The function of bank guarantee funds is to assist banks grappling with financial hardships to avoid insolvency. In Germany, this obligation could fall on the German cooperative banks' guarantee fund, which is poised to lend a hand to Volksbank Bad Salzungen Schmalkalden, as per the preliminary estimates.
Despite being dubbed the "Effenberg Bank" due to litigation related to soccer club loans, Steinle clarified that the term was an exaggeration.
In the broader European banking landscape, 75% of rating outlooks maintain stability, with 19% displaying positive signals. The reliance on deposit funding, fueled by households, and robust liquidity buffers serve to shield these banks from external shocks. However, contingency liquidity plans will become increasingly vital as liquidity reserves gradually diminish.
Volksbank Bad Salzungen Schmalkalden, like many European banks, relies on these favorable market conditions to weather financial turbulence. Nonetheless, the bank's reported five million euro loss raises concerns that it might require external support to navigate its difficulties and restore financial stability.
[2] Source: European Central Bank (2025) Annual Banking Stability Report.
