Volksbanken Implement Stricter Regulations Following Costly Emergency Interventions

The cooperative banking sector in Germany is witnessing a significant shift as the Volksbanken and Raiffeisenbanken tighten their operational guidelines in response to several costly crisis interventions. The Federal Association of German Volksbanken and Raiffeisenbanken (BVR) is spearheading this initiative, emphasizing the need for accountability in managing financial risks.

In 2024, the BVR's protective fund had to shield three banks from nearly EUR500 million in risks--a stark increase that has raised alarms within the cooperative banking community. This situation has prompted BVR President Marija Kolak to assert that the safety net provided by the association should not be exploited for reckless financial decisions or high-risk ventures.

To address these challenges, the BVR is planning fundamental changes to its risk management protocols. Future compliance will focus heavily on identifying and addressing banks that engage in excessive risk-taking or pursue questionable business models. BVR board member Daniel Quinten highlighted the association's expectations regarding the diligence of management in cooperative banks. He noted that adherence to these expectations will now be a critical component of oversight.

Furthermore, the BVR is considering implementing a policy that would allow it to participate in meetings of the supervisory boards of banks facing crises. This step would facilitate direct communication with the regulators of struggling institutions, ensuring that the BVR can act swiftly when necessary.

Despite the recent issues, Kolak reassured stakeholders that the majority of cooperative banks maintain solid operational standards. She emphasized that mismanagement is intolerable within the solidarity framework of the cooperative banking community. Customers must have confidence that their financial institutions are being managed effectively and securely.

The BVR reports that most of the cooperative financial group, comprising 672 Volksbanken, Raiffeisenbanken, Sparda-Banken, and PSD Banken, has demonstrated resilience in navigating economic fluctuations. Collectively, these institutions recorded a pre-tax surplus of approximately EUR9.5 billion, reflecting a 2.3% increase from the previous year. The preliminary figures indicate a significant rise in profits, with earnings reaching over EUR2.1 billion compared to around EUR1.96 billion in 2023.

As the cooperative banking sector moves forward, the BVR is committed to enhancing its risk management frameworks to prevent future crises and ensure the stability of its member institutions. This proactive approach aims to reinforce the trust of customers and the broader financial community in the cooperative banking model.