Depositors Swarm German Banks as Banking Crisis Grips Eurozone Peripheral Economies

Depositors from eurozone nations find the German banks as a safe haven for their money as the banking crisis gripped more nations in the region along with lack of any tangible solution to the sovereign debt crisis, so far.

Deposits in the German banks recorded a 4.4 percent increase and reached 2.17 trillion euros ($2.73 trillion) as of 30 April, according to European Central Bank (ECB) statistics.

Meanwhile, according to Bloomberg data, deposits in Spain, Greece and Ireland fell 6.5 percent to 1.2 trillion euros during the same period.

Deutsche Bank AG (DBK) secured five billion euros extra from September to March while Frankfurt-based Commerzbank AG (CBK) added an additional seven billion euros in the first three months of 2012, Bloomberg reported.

The German branches of foreign lenders are also seeing a surge in deposits. According to Bundesbank data, the deposits at German branches of foreign lenders rose to €82.9bn as of 30 April as against the €60.4bn euros in the previous year.

"The longer the debt crisis lasts, the more funds will flow to Germany. People think of Germany as the euro area's safest country," Bloomberg quoted Dieter Hein, a banking analyst with Fairesearch GmbH in Frankfurt as saying.

The fear of Greece being pushed out of the 17-member single currency region is also another reason for the capital flow to German banks. The Greeks go to the polls on 17 June to elect a new government whose approach to the issue of austerity measures would decide the country's future in the single currency region.

A recent report by Standard & Poor's puts the chances of Greece leaving the eurozone as one-in-three.

The exit would depend on the possibility of Greece rejecting the austerity reforms demanded by the European Union and the IMF, said the S&P statement.