Finance

Finance in Germany

Germany has a long banking tradition, from the merchant bankers of the 16th century to 19th-century industrial financiers, and today's mix of Landesbanks and multinational giants.

The sector is proud of its sensible approach, and consumer-focused services, but which banks should new German residents choose? This article will provide a quick introduction to put things in perspective.

Banking System in Germany

Germany's banking system includes four major types of institution, and there are some important distinctions between them

Firstly, there are private commercial banks. These banks control almost half of all German assets and finance most of Germany's international trade. And within that sector, Deutsche Bank reigns supreme, being the 11th biggest bank worldwide.

However, private banks don't dominate the retail banking sector. The three largest private banks control 15% of the retail sector, but they are rivaled by public sector and cooperative banks - not to mention so-called "free" banks.

The public banks are divided into Sparkassen (local savings banks, don’t confuse with the name of big German bank Sparkasse!) and Landesbanken (regional banks). Seven Landesbanks operate in German regions, while smaller Sparkassen tend to operate in particular cities or urban areas.

Also known as Raiffeisenbanken, cooperative institutions are the final major group, and there are around 1,000 across Germany.

Both coops and public banks tend to cater for local communities and aren't usually focused on international visitors. But they are seen as more reliable and less risky, and some are moving toward more outward-looking strategies.

What is the largest bank in Germany?

For those who are curious, Deutsche Bank is easily Germany's biggest bank, being around 4 times the size of Commerzbank, its nearest competitor.

Among the Landesbanken, Bayerische Landesbank comes first, followed by Norddeutsche Landesbank. And DZ Bank is probably the biggest cooperative banking group.

Direct Banks for Internationals

Many international visitors prefer to use Direct Banks. These newer banks use the ATM infrastructure of conventional banks but do away with physical branches, using digital platforms instead. As a result, they tend to offer much lower fees.

How many banks are there in Germany?

According to national statistics, there are 1,900 banks in Germany, including 1,000 cooperative banks, 403 Sparkassen, and far smaller numbers of private banks and Landesbanken. That works out as 1 bank branch for every 2,500 Germans - a very high number of branches by international standards.

However, while bank numbers are high, they have been declining in recent years. The rise of mobile banking and the internet have accelerated branch closures, albeit from a much higher level.

People

Best Banks in Germany

Germany's banking landscape is changing fast, and here are some of the current leading operators for international residents to consider:

  • N26 - Based in Berlin, N26 has quickly become one of the country's biggest Direct Banks. Offering checking accounts with Mastercard Debit cards, N26's accounts can be set up in seconds online, and work in all Eurozone countries.
  • Monese - British company Monese offers services for people who move between countries and addresses regularly. There's no need for a fixed address. Customers can just use their phone to create an account wherever they are, and access ATMs all over Germany.
  • DKB Cash - A leading Direct Bank, DKB Cash is popular due to its zero fee accounts and slick online services.
  • Postbank Giro Plus - Postbank is Germany's biggest retail bank, and its Giro accounts feature extremely low fees. They come with Visa cards too, widening customer purchasing options

Which bank is the best bank for students in Germany?

These banks are all high-quality companies, but not all cater for students. If you need a solid financial partner during a degree or postgraduate study, you'll want cheap rates, easy money transfers internationally, and foreign language support.

N26 for international students

N26 is probably best situated to provide those services you need as an international student. You can manage everything online via a simple app, and the company has excellent support for international customers.

Savings and loans in Germany

When you purchase a property in Germany, you don't take out a mortgage

Instead, you take out a building loan contract, or Bausparvertrag. These loans are generally offered by a group of financial institutions called Bausparkassen, which are similar to building societies, and specialize in connecting consumers with properties.

Before they can obtain a Bausparvertrag, customers must usually save a certain amount with the Bausparkassen. If you save this amount, you will automatically become eligible for the loan, at a pre-set interest rate.

If you intend to save for a home loan in Germany, always look for hidden fees along with the main interest rate. What looks great at first, can sometimes come with major costs later on.

Alternatively, some loans do not require any upfront savings. Instead, an agreement is made to pay into a special savings account while the home is paid off. Again, this comes with a fixed interest rate in many cases.

These loans aren't for everyone, and may not suit expats living in Germany due to the long payment periods involved. German savings and loan institutions are also quite conservative, requesting in-depth evidence of your financial situation, and often demanding high deposits.

For these reasons, renting remains popular among international residents. With 1 bedroom apartments available for €500-700 per month, that's often achievable, even in larger German cities.

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