Criticized securities: BaFin: Partly defects in investment certificates

Consumer advocates they consider them opaque, savings banks and Volksbanken temporarily sold them on a large scale: Now the financial supervision Bafin has taken a closer look at certificates and, at least in some cases, found defects. However, there was no systematic misconception from banks and savings banks, emphasizes Thorsten Pötzsch, who is responsible for the security supervision in the Bafin directorate.

In some cases, providers in interest and express certificates have not carefully defined enough which customer groups and under which market conditions these papers should be sold, Bafin explained.

In addition, there were indications that around 20 percent of customers had not fully understood the functioning and risks of express certificates. “The BaFin will ask institutes where they have identified defects in writing.”

Critics consider the papers to be complicated and expensive

Among other things, savings banks and cooperative banks have sold massive certificates to their customers. A certificate is a bond, the performance of which in turn depends on the performance of an underlying underlying underlying – such as shares of a certain company, raw materials or currencies.

A sales racer was temporarily so -called structured bonds. They offer the chance of a return above the current interest rate and generally promise a repayment of the capital employed at the end of the term – unless the provider goes bankrupt.

Consumer advocates consider the products to be too complicated and comparatively expensive for customers. In addition, structured bonds would also be sold to customers because of their attractive sales commissions of money houses who only asked for classic interest rate products such as daily or fixed deposits.

Bafin: Customers were not “pushed” in certificates

In May 2024, the Federal Financial Service Supervisory Authority (BaFin) announced that it was closely examining the booming certificate market. A realization of the investigations: “The financial supervision has not found any evidence that banks and savings banks had instead pushed their customers who were interested in deposit products after the turning point.”

Tart losses for many investors

However, Pötzsch is concerned about developing turbo certificates. In these papers that are equipped with a lever, which increases price fluctuations, invested more than half a million people in Germany in the period in 2019 to 2023. Around 75 percent have lost their money: more than 3.4 billion euros in the five years.

“Even if the buyers of Turbo certificates are partly experienced, the manufacturers and sales companies have to show the risks of such products sufficiently prominently and transparently,” warns Pötzsch. “The study shows that there is still room for improvement.”