GERMANY

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The Federal Republic of Germany is the leading economy in the Eurozone both in population terms (83 million inhabitants, a quarter of the Eurozone’s 341 million total) and its share of Eurozone GDP (more than one third). GDP per head is 20% above the Eurozone average, making it one of the most prosperous Eurozone countries.

Germany is the world’s fourth largest economic power after the US, Japan and China, and the third largest exporter after China and the US. The manufacturing sector plays a vital role in the economy. It accounts for almost 20% of employment and contributes almost a quarter of total value added. However, industry’s central role makes Germany’s economy more cyclical than some of its neighbours.

The Federal Republic comprises sixteen states (Bundesländer). Each state has its own state constitution, and is largely autonomous concerning its internal organisation. The most prosperous states are Bayern and Baden Württemberg in the southern part of the country. GDP per capita in these states are about 15% higher than the German average. The dynamism of the area is largely due to its sector specialisation. Manufacturing production makes up around 30% of production, and is concentrated in hi-tech industries. Eastern regions have done reasonably well in the past couple of years. This was partly a catch up effect. Nevertheless, GDP per head in the Eastern Länder, excluding Berlin, was still about 25% lower than in the country as a whole. The Western and Northern Länder have seen the most sluggish growth over the past few years. The region is home for Germany’s heavy industry. Activity is mainly driven by robust domestic demand, while external demand has contributed little to economic growth.

The Covid-19 crisis has severely affected the country although less than the surrounding countries. Because of rigorous testing, the country was able to keep the rate of infections, hospitalisations and death relatively low. Nevertheless, the economy shrank by around 4.6% in 2020. In 2021, the economy is expected to rebound by around 3%.

The German general election was narrowly won by the SPD (social-democrats) headed by finance minister Olaf Scholz. According to the preliminary results, the party obtained 25.7% of the vote. Mr Scholz is seeking to form a coalition government with the Greens and the liberal FDP. This process is expected to take several months. During this time, the current grand coalition between CDU/CSU (Christian democrats) and SPD headed by Angela Merkel will remain in place.

Summary

BNP Paribas has been active in Germany since 1947 and is one of the most significant foreign banks operating in the country with more than 5,000 employees. The bank supports its customers in Germany through 8 business centres (Berlin, Cologne, Frankfurt, Hamburg, Hanover, Munich, Nuremberg, Stuttgart) and offers a comprehensive portfolio of cash management and trade finance services. These include innovative solutions such as virtual IBAN. BNP Paribas is a member of the Deposit Protection Fund of the Association of German Banks.

Currency

  • Germany uses the euro (EUR).

Bank accounts

  • A company is generally considered resident in Germany if its place of effective management is located in Germany, or it is legally registered there.

Factoring

  • Cross-guarantees are not possible due to extended “retention of title”. 
  • Ban of assignment regulated by German law (not as strong as e.g. in Switzerland). 
  • Three party agreement as an instrument to deal with legal matters. 
  • Purchasing associations (“Zentralregulierer”) are specific for the German market. Due to legal framework a three party agreement could be necessary. 
  • Banking license is necessary for credit/bank business and inventory financing – BNP Paribas Factor only provides factoring solutions.

BNP Paribas Cash Management Capabilities

Cash collections
Cheque collections
Direct debit collections
Domestic incoming transfers
Virtual IBAN
Virtual accounts
International incoming transfers
Card acquiring

Payments & collections

Electronic credit transfers are the predominant instrument used by companies to make supplier, payroll and tax payments. Direct debit use is high in Germany; the number of direct debits per capita is 250% more than the EU average. Card use is increasing in  Germany, albeit from a low base. According to a central bank report, 30% of all recorded payments at the point of sale in 2020 were made using a card. Cash payments accounted for 60%.

E-wallet transactions are available, but adoption figures are low. The dominant electronic wallet scheme, GeldKarte, is often incorporated into debit cards, but other mobile payment schemes including Google Pay and Apple Pay are available. PayPal is the most widely used digital wallet.

Electronic banking services are available from most banks. Domestic companies primarily use MultiCash or MultiWeb, both of which support EBICS. Multinational companies also use the SWIFT for Corporates messaging standards. Transaction and balance reporting, automated end-of-day sweeping, and some transaction initiation services are available on a domestic and cross-border basis.

Short term investments

Interest payable on credit balances

  • Interest-bearing current accounts are permitted for residents and non-residents.

Demand deposits

  • Demand deposits are available for residents and non-residents.

Time deposits

  • Time deposits are available in or major foreign currencies for terms ranging from one night to more than one year.

Certificates of deposit

  • Domestic banks issue certificates of deposit (CDs) for terms ranging from one to six months. Longer maturities are possible for investments greater than EUR 1 million.
  • CDs can be issued paying fixed or variable interest.

Treasury (government) bills

  • The German government issues two types of Treasury bills (T-bills):

     

    • T-bills issued at a discount, from six months to two years, which do not pay interest; and
    • T-bills issued at a fixed rate, with tenors from three months to more than two years.
  • Bubills are issued by the German Finance Agency. These are zero-coupon T-bills and are issued with maturities of six months.
  • Bunbesschatzanheisungen are issued by the Bundesbank with maturities of two years.

Commercial paper

  • Domestic commercial paper is issued by large companies and banks with terms ranging from one week to two years.
  • Euro commercial paper (ECP) is issued by larger companies with a published credit rating. ECP can be issued in a range of currencies.

Promissory notes

  • German companies issue promissory notes (Schuldscheindarlehen) with maturities of two to ten years.

Money market funds

  • Domestic money market funds are increasingly popular short-term investment instruments.

Repurchase agreements

  • Repurchase agreements with maturities ranging from overnight to one week are commonly available in Germany. Longer terms are sometimes available.

Banker's acceptances

  • Banker's acceptances are used and have maturities of between one and three months.

BNP Paribas Trade Finance Capabilities

Documentary credits
Documentary collections

International trade

  • As a member of the EU, Germany follows the EU customs code and applies all associated regulations and commercial policies.
  • Trade with other countries in the European Economic Area (EEA) and Switzerland is exempt from tariffs and other controls.