Investing.com — Problems at Volksbank Brawo are highlighting growing strains among Germany’s cooperative banks after several lenders expanded into riskier loans and investments, Bloomberg reported Saturday.
Volksbank Brawo said some assets may need to be written down and it could seek support from the cooperative banking sector’s rescue fund following the departure of longtime Chief Executive Juergen Brinkmann in May.
Brinkmann spent about 15 years expanding the regional lender into a broader finance, real estate and investment group encompassing hundreds of businesses.
Volksbank Brawo is among more than half a dozen German cooperative lenders that have sought help from peers in recent years after rising interest rates, borrower defaults and asset repricing exposed weaknesses in investments made during the low-rate period.
Germany’s cooperative banks collectively had a €1.7 trillion ($2 trillion) balance sheet last year, including DZ Bank, compared with €1.4 trillion at Deutsche Bank AG NA O.N. (NYSE:DB).
Around 650 banks contribute to the sector’s mutual support system, which assists when individual lenders run into difficulty. At least €1 billion in support has been extended in recent years based on information disclosed by individual lenders.
Pressure on the system is increasing. DZ Bank expects its contributions to the rescue mechanism to nearly double to €117 million this year from €59 million in 2025.
Troubled assets are also increasingly being transferred to BAG Bankaktiengesellschaft, the sector’s joint bad bank. More than €1.2 billion of unwanted loans were sold to BAG last year, the highest amount in over two decades and up from roughly €230 million a year earlier.
Other cooperative lenders requiring support have included Volksbank Kleverland, VR-Bank Bad Salzungen Schmalkalden and Bankhaus RSA.
The broader sector remains profitable, earning €11.6 billion before tax last year, compared with €9.7 billion at Deutsche Bank.
Germany’s cooperative banking sector approved reforms to its protection system in June aimed at strengthening oversight and allowing earlier intervention when lenders encounter financial problems.
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German regional banks face strain as Volksbank Brawo troubles deepen
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Investing InsightsAugust 29, 2026German regional banks face strain as Volksbank Brawo troubles deepen
