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German public banks near deal on deposit protection system: sources

[FRANKFURT] Germany's public sector banks are close to reaching a deal on the future of a deposit protection scheme for landesbanks and savings banks, people familiar with the matter said.

Germany's six landesbanks and 416 savings banks run their own rescue fund. The EU has asked them to make sure that 0.8 percent of the deposits are held in liquidity so bank customers can be reimbursed quickly in case of a bank failure.

By 2024, Germany's public sector banks need to prop up the total reserves of the fund by 3 billion euros (S$4.35 billion).

After months of discussions, a compromise has been found according to which the wholesale-funded landesbanks will stump up more money for the rescue fund than local home-loan banks affiliated with the savings banks, they said.

A such deal may be signed as early as Tuesday, they added.

If a landesbank collapses, rival public banks will be the first in line to jump in, they said.

In the financial crisis, almost all landesbanks fell victim to risky investments and had to be bailed out by the taxpayer.