Auditing Association of German Banks – Minimising the Risks in the Interest of Deposit Protection
The Auditing Association of German Banks is an important component of the Deposit Protection System in the private banking community. Through its activities it contributes significantly to maintaining stability and strengthening the competiveness of private banks (in particular) and the financial community (in general).
The way deposit protection is organised in Germany was shaped by the banking structures which have envolved over the years. The tripartition into the private banking sector, the savings bank sector and the cooperative bank sector that is a feature of the German banking system is reflected also in the different protection schemes operated by the individual banking groups.
On behalf of both compensation schemes for private-sector institutions, the Auditing Association based in Cologne assumes the function of auditing institution for the Deposit Protection System in Germany. Among its tasks as risk manager of deposit protection are early risk detection and prevention, as well as the supervision of restructuring measures at banks. Any claim from both compensation funds is thus to be prevented as best as possible and the risk potential limited. In case of compensation, the Auditing Association and its associated companies are mainly involved in the implementation of depositor compensation and further resolution procedures.
The auditing facility of private banks
The Deposit Protection System of the private banking sector consists of two coexisting compensation funds and the Auditing Association of German Banks.
The Compensation Scheme of German Banks (EdB) is the statutory protection mechanism of the private banking sector. It is a legal entity of a protection fund financed by mandatory contributions from all deposit banks. Client deposits – with some exceptions – are protected up to a maximum limit of 100,000 euros (“basic cover“) by the Deposit Guarantee Act (EinSiG).
The Deposit Protection Fund (ESF) is the second line of protection of the private banking sector, established voluntarily and based on private law. In the case of members institutions’ covered by the Compensation Scheme of German Banks (EdB) it protects non-recorded deposits of non-banks up to a ceiling amount fixed individually for each bank (”follow-up cover”). More detailed information can be found on
the Federal Association of German Banks website.
The tasks, which are in the interest of the Deposit Protection Fund, are specified in
the Articles of the Auditing Association. The latter especially includes the performance of
Deposit Protection Audits, the execution of
Admission and Ownership Control Procedures, as well as activities in the framework of
Risk Management .
The Asssociation carries out audits for the German Banks’ Compensation Scheme
under the provisions of the Deposit Protection Act.
The spectrum of tasks and services is explained in more detail in
Specialist and Association Work.
To perform its tasks the Auditing Association has a 100-percent holding in four companies, respectively. The
Associated Companies are specialised in subareas and carry out the necessary activities for the Auditing Association’s task in the framework of the preventative protection of the Deposit Protection Scheme. At the same time, the associated companies offer an extensive range of services in particular for member institutions and their associated companies.
Auditing Association: A Brief Profile
The Auditing Association of German Banks founded in 1969 is part of the Deposit Protection System in Germany.The Association regularly carries out audits at the affiliated banks to prevent any claim of the compensation funds as far as possible and to limit potential risks.In the framework of its participation in associations and committees, the Auditing Association is actively involved in issues relating to deposit protection and also participates in committees dealing with regulatory requirements on a national, European and international level.Members of the Auditing Association are the member institutions, currently around 144 institutions in the private banking sector.The Auditing Association and its associated companies currently employ a staff of around 160.Between 50 and 70 banks are audited per annum. The Auditing Association’s employees require approximately 9,000 auditing days.
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