Herstatt bankruptcy (Herstatt collapse)

The insolvency of the then highly respected Cologne-based private bank Iwan D. Herstatt in June 1974. The bank was considered a top address on the financial market. With around DM 1.2 billion in debts from foreign exchange transactions, the bank was closed by the supervisory authority. Numerous private depositors lost their assets and some were themselves forced into bankruptcy. Public depositors were also harmed, such as the City of Cologne, the City of Bonn and the pension fund of the Archbishopric of Cologne, which feeds the pensions of former Church staff members. This high-profile insolvency had a lasting signal effect and was the reason for making deposit insurance mandatory in Germany. – See counterparty risk, investor protection, firefighting fund, Herstatt risk, safeguarding obligation, speculation, overflow system.

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University Professor Dr. Gerhard Merk, Dipl.rer.pol., Dipl.rer.oec.
Professor Dr. Eckehard Krah, Dipl.rer.pol.
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