Digital Euro Could Have Devastating Consequences for German Banking Industry

03/10/2023 20:50 • NFT Newsflash • 135 views

It is reported that a survey by the Federal Association of German Community Banks (BVR) found that the introduction of digital euro may have devastating consequences for the German banking industry. According to the survey, if each person converted 3000 euros into CBDC, only 56 of 714 institutions could meet the liquidity buffer required by law. This means that banks will have to find alternative and more expensive sources of funds.

Federal Association of German Community Banks: Digital Euro is dangerous for small banks

Analysis based on this information:

The Federal Association of German Community Banks (BVR) recently conducted a survey to gauge how the introduction of digital euro could potentially impact the German banking industry. The results of this survey revealed that the situation could potentially be devastating for the country’s banking industry.

The survey found that if each person in Germany were to convert 3000 euros into a Central Bank Digital Currency (CBDC), only 56 of the 714 institutions in the country could meet the required liquidity buffer mandated by law. This means that the vast majority of German banks would need to find alternative sources of funds, which would likely be more expensive and difficult to access.

This news is particularly concerning since the introduction of a digital euro is being perceived as an increasingly likely possibility, with the European Central Bank currently considering the proposal. The idea behind the digital euro is to provide customers with a more convenient and secure way of making transactions, while also reducing the reliance on cash.

The implications of this shift, however, would be felt by the entire banking industry, particularly smaller institutions that would struggle to compete with larger banks in attracting funds. In effect, this could lead to greater consolidation in the industry, ultimately reducing competition and potentially leading to higher costs for consumers.

Moreover, for many customers who rely on local banks for both personal and business transactions, this could result in considerable inconvenience, with fewer ATMs and branches available. Smaller banks in rural areas and other regions could also be hit the hardest since they may not be able to access funds as easily as their larger counterparts.

In conclusion, the potential introduction of a digital euro could have far-reaching consequences for the German banking industry, particularly for the country’s smaller banks. In addition to the challenges associated with meeting the required liquidity buffer, smaller banking institutions may also face greater difficulties competing with larger banks that are better able to attract funds. Ultimately, consumers could see costs rise and face greater inconvenience in accessing banking services in their communities.

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Digital Euro Could Have Devastating Consequences for German Banking Industry

Federal Association of German Community Banks: Digital Euro is dangerous for small banks

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