The Bank for Church and Diaconia (“KD-Bank”) based in Dortmund is committed to Christian values and is organised as a co-operative – just as Friedrich Wilhelm Raiffeisen had envisaged it. An interview with the chair of the board Ekkehard Thiesler.
Interview: Thomas Becker
About the Person
Ekkehard Thiesler, born 1965, is a banker and economist. His doctoral thesis was on the subject “Sustainability of co-operative primary banks in Germany”. He has been chair of the KD-Bank since 2005.
Mr Thiesler, how important is Friedrich Wilhelm Raiffeisen for the self-understanding of the KD-Bank?
Very important. Especially because the founders wanted to establish a Christian co-operative bank, which would function in the same way as it was with Raiffeisen, according to the principle of “one for all and all for one”. In real terms this meant: whoever used money for good purposes should also receive it – not as a charitable handout but as a loan or on credit. And if anyone had surplus money left then this would be given to a central fund, i.e. the bank, so that it could be used for good purposes. The idea of founding such a bank, that would be specifically there for church and diaconal work, had already been around before the First World War. This co-operatively organised bank would be different from joint stock companies which operated as an end in themselves, to be traded on the stock exchange at the highest possible rates.
What is the aim today?
As a co-operative we see our central aim as that of being a force for good. We understand this as being able to finance for example hospitals or institutions offering care for older people which might sometimes be blacklisted by other banks.
Because it is too risky to maintain them?
Partly. Yes. We only need to take a look at the hospital sector as such. At present a great many hospitals are being closed, especially in rural areas. This trend is likely to continue over the coming years. Among our customers at present we have 149 hospitals and we are naturally trying to ensure that they are financially viable. To this end we are, when necessary, seeking a solution jointly with them, which might for example consist in some institutions merging or becoming specialist units. Altogether we have around 1.6 billion euros invested in the health sector. We invest in quality of life in old age, care provision, active community living, education, affordable housing as well as private house-building. That is the core of our business.
In the past year the KD-Bank has generated surpluses in excess of 7.8 billion euros. What have you done with the money?
Most of that has gone into reserves. This serves to raise our equity capital ratio, which we are legally bound to do – as a reaction to the financial crisis of over ten years ago. In addition, every year we pay a dividend to our members. Most recently this amounted to around one million euros. That is not a lot, but our customers are grateful, because at least they are getting a return on their holding amounting to 4 percent.
How does this fit with Raiffeisen’s demand that any profits or surplus should be used for the benefit of charitable purposes and for people in need?
To my mind, and this is perhaps a tricky thesis, we are following the same procedure. We pay the dividends back into the church-related and diaconal institutions and the money goes into their budgets. They can use it to fulfil their mission. And the task of both church and diaconal welfare work is quite clearly directed towards charitable work and public benefit.
Do all the clients who are members of the co-operative KD-Bank come from the realm of church and diaconal work?
Yes. Our 4000 or so members are exclusively institutional groups from the church or diaconal work. With one exception. Because of the law relating to co-operatives the individuals who sit on the Supervisory Board of the Bank are obliged to be members as well. But because of the comparatively small number of those, this is really of no consequence. In addition of course, as a Bank we do have private customers as well. Many of these ask us why they cannot become members. But we have to decline, because we do not want to water down our remit.
Is there a danger of that happening, then?
Yes, because as a co-operative we are organised according to grass-roots democracy. Whether it be Regional Churches, the Evangelical Church in Germany or local church congregations – at our General Assemblies they all have one vote on an equal footing. For that reason it is important that we all act together with one accord when it comes to voting. It is different with a public incorporated company. Those who hold a majority of shares control the direction. So if around 30,000 private customers also became co-operative members, they would have more voting rights than our 7,000 institutional customers. That would lead to the private customers deciding where things are heading.
And would that be such a bad thing?
Private customers have different expectations of a bank – whether it is for a construction loan or life insurance. Of course we offer these as well on good terms. Institutional clients attach importance to whether the circulation of money to church and diaconal work is functioning well. And it is to this end that we were founded. Supporting this Evangelical link and strengthening the community is important to us. We don’t want to give that up under any circumstances.
Do your customers and members keep a close watch on things?
Yes, absolutely. And that is a good thing, because it earths us. There was a time when certain financial products and tax-saving schemes were hyped up in the banking sector, which promised particularly high returns. Our wealthier private customers often said: Mr Thiesler, you have to offer these as well! Let’s take for example the so-called Cum-Ex business deals in Germany. For many of our clients and members, Cum-Ex became almost as if they were proposing a toast to them. When I explained what actually lay behind it – paying out capital gains tax once, but then claiming it back multiple times – the reality quickly became clear to them. Strictly speaking, it was legal, but as far as we were concerned it was not legitimate. So we refused to do it. Before the financial crisis, therefore, we were regarded as outdated, conservative, fusty, boring.
We did everything right! (laughs)
Has this observation been reflected in increased clientele?
Ten years ago, when considerable uncertainties prevailed concerning the big banks, a number of clients came to us. But that has levelled out. We have a stable clientele and that is where we attach the most importance.
Can anyone become a customer and open an account with the KD-Bank?
We say that customers should share our Christian values, but we do not check that out. In the end it can be automatically assumed. We do very little advertising and most of our clients are full-time staff or volunteers from the church and diaconal work who have had their attention drawn to us by their employers. As a general rule they stay with us for a long time.
Does the KD-Bank deal particularly charitably with customers or members who are unable to pay their loans back to the bank?
We are often asked that question. And the answer is always the same: we manage our funds in trust. When a local congregation invests money with us, they must be able to get it back eventually. And so for that reason we take great care about which projects we finance. We are very familiar with the sectors in which we are actively involved. If a diaconal agency wants to build an old people’s home for instance, we are well able to assess the economic efficiency of it.
And what about when there is a shortfall in the repayment of the loan?
In that case we offer support to customers and members in finding a solution. For example, we talk to the creditors and set up budget or business plans. If there is a good chance that the loan will be repaid, then we defer the repayments: the customer just pays the interest for an agreed period of time. We also have an arrangement in place that our staff do not have any sales targets set for pressing a client to take out life insurance. This makes us very different from other banks. We want our financial advice to be fair and honest.
So what role is played by ‘fair’ financial investments for the KD-Bank?
Over ten years ago we brought in a sustainability filter which affect all the investments made by the bank. A leading factor in this are the aims of the Conciliar Process of Justice, Peace and Integrity of Creation. With all our financial investments we are careful to take into account that a complex catalogue of criteria underlies it. So we have joined in establishing the so-called FairWorldFund, which among other things allocates microcredits in countries where development co-operation is established. In the beginning we were sceptical and thought: if the fund at some point reach a volume of 100 million euros, that would be super. Now we have reached a billion euros. That proves that we are on the right track.