Germany - Country Commercial Guide
Trade Financing

It covers payment methods and information on, banking systems, foreign exchange controls, and U.S. and correspondent banking.

Last published date: 2021-11-16

Selling to the Public Sector

Methods of Payment 

The majority of  import transactions by German customers, especially those involving large German distributors, take place under seller-buyer terms, such as the common 30/60/90-day accounts, or payment against documents. The electronic funds transfer (EFT, equivalent to SWIFT or wire transfers) is the most popular payment mechanism by which German importers remit payment to their U.S. suppliers and is the fastest and cheapest way to transfer funds. Current technology makes online transfers reasonably secure and transparent. 

The letter of credit is still used in some industry sectors but now covers a fraction of total imports, largely due to its cost and time requirements as well as the ease in obtaining credit ratings in Germany, which increases transparency and transactional safety. L/C’s  for payments under USD 5,000 are almost unknown in Germany. U.S. exporters may also encounter Bills of Exchange (Wechsel), usually payable within two or three months, however this antiquated payment mechanism is also passing from the scene. Cash-in-advance is also rare in German import payment. 

Both private and public credit insurance are available in Germany. Euler Hermes (German),  Coface  (French) and Atradius (Dutch) are among the private providers (which also offer ranking and scoring services), and the main public insurer is the Staatliche  Kreditversicherung (Hermes-Bürgschaften), which is administered by Euler Hermes and is used to cover German exports to countries with high political and country risk. 

Overall, German firms continue to enjoy a relatively good reputation for their payment practices and management of credit.  However, default risks in Germany vary from region to region and industry to industry.  The U.S. Commercial Service Germany offers the International Company Profile as a tool to help evaluate the creditworthiness of potential customers or partners and recommends that U.S. exporters consider normal, prudent credit practices in Germany in all transactions. 

The Export-Import Bank of the United States (Ex-Im Bank) is the official export credit agency of the United States. The Ex-Im Bank’’s mission is to assist in financing exports of U.S. goods and services to international markets. The Ex-Im Bank enables U.S. companies –- large and small –- to turn export opportunities into real sales that help to maintain and create U.S. jobs and contribute to a stronger national economy. The Ex-Im Bank does not compete with private-sector lenders but instead provides export-financing products that fill gaps in trade financing. The bank assumes credit and country risks the private sector is unable or unwilling to accept and helps level the playing field for U.S. firms by matching the financing that other governments provide to their exporters. The Ex-Im Bank provides working capital guarantees (pre-export financing), export credit insurance, loan guarantees, and direct loans (buyer financing), primarily focusing on developing markets worldwide. For further information on Ex-Im Bank’s objective and programs, please see the website.   

For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide.

Banking Systems 

Germany has a non-discriminatory, well-developed financial services infrastructure. Although corporate financing via capital markets is on the rise, Germany’s financial system remains mostly bank-based, with bank loans serving as the predominant form of funding for firms, particularly the small- and medium-sized enterprises of Germany’s famed Mittelstand. 

Germany’s universal banking system allows the country’s more than  1,679 banks and savings  banks and network of  25,800 branches  to take deposits and make loans to customers as well as  to trade in securities. There are no reports of a shortage of credit in the German economy. Credit is available at market-determined rates to both domestic and foreign investors, and a variety of credit instruments are available. The traditional German system of cross-shareholding among banks and industry, as well as a high rate of bank borrowing relative to equity financing, allowed German banks to exert substantial influence on industry in the past.  

Key Link: The German Bankers’ Association   
Key Link: Federal Financial Supervisory Authority  

Germany has a modern banking  sector,  but it is considered “over-banked,” as evidenced by ongoing consolidation and low profit margins. The country’s so-called “three-pillar” banking system is made up of private commercial banks, cooperative banks, and public banks (savings banks or Sparkassen, and the regional state-owned banks, or  Landesbanken). German banks’ profitability is increasingly under pressure given very low interest rates,  high-cost  structures,  growing competition from  FinTechs,  and increasing compliance costs as a result of new regulation and supervision.  German  banks have seen their interest margin narrow during the negative interest  rate period that began in 2014.  Banks  are  currently  discouraging customers by charging negative rates to a growing number of depositors –-  corporates and private retail clients alike (depending on the bank on deposits exceeding €EUR 50,000 or €EUR 100,000)  – - and have substantially increased fees for banking services and accounts to compensate for interest rate earnings losses. 

Private banks control roughly  40 percent% of the market, while publicly owned savings banks partially linked to state and local governments account for 50 percent% of banking transactions, and cooperative banks make up the balance. All three types of banks offer a full range of services to their customers. A state-owned bank,  KfW, provides special credit services, including the financing of homeowner mortgages, guarantees to small- and medium-sized businesses, financing for projects in disadvantaged regions in Germany, and export financing for projects in developing countries. 

The private bank sector is dominated by the universal banks Deutsche Bank (Germany’s largest bank by balance sheet total) and Commerzbank (fourth-largest bank), with balance sheets of €EUR 1.3 trillion and €EUR 506.9  billion respectively (2020  figures). Commerzbank received €EUR 18 billion in financial assistance from the federal government in 2009, for which the government took a 25 percent stake in the bank (now reduced to 15.6 percent).  Merger talks between Deutsche Bank and Commerzbank failed in 2019.  The second largest of the top ten German banks is DZ Bank, the central institution of the Cooperative Finance Group (after its merger with  WGZ  Bank  in July 2016), followed by  KfW, Commerzbank, LBBW,  and  German branches of large international banks (UniCredit Bank,  or HVB, or ING-Diba), and regional state-owned banks (LBBW, Bayern LB,  Helaba,  NordLB). Germany’s regional state-owned banks were among the hardest hit by the global financial crisis and continue to face major challenges to their business models. The federal government is  still  in the process of winding down several so-called “bad banks” composed of toxic assets of failed banks  WestLB  (now  Portigon  AG) and Hypo Real Estate.  All German banks have weathered the COVID-19 pandemic well thanks to  cheap  central bank liquidity regulatory easing, and  moratoria on corporate insolvency laws.  

Most major U.S. banks are represented in the German market, principally but not exclusively in the city of Frankfurt am Main, Germany’s main financial center.  Following the UK’s exit from the EU, many U.S. banks chose Frankfurt as their EU headquarter.  A large number of  German banks, including some of the partially state-owned regional banks, similarly maintain subsidiaries, branches, and/or representative offices in the United States. 

Practices regarding finance, availability of capital, and schedules of payment are comparable to those that prevail in the United States. There are no restrictions or barriers on the movement of capital, foreign exchange earnings, or dividends. 

Foreign Exchange Controls 

The German government imposes no forms of controls on the purchase or sale of foreign currencies. 

U.S. Banks & Local Correspondent Banks 

Bank of America 
Neue Mainzer Straße 52, 60311 Frankfurt am Main, Germany 
Phone: +49 69 589910 

BNY Mellon
Messe  Turm, Friedrich-Ebert-Anlage 49, 60308 Frankfurt am Main, Germany 
Phone: +49 69 12014 1000 

Citigroup Global Markets Germany 
Reuterweg 16, 60323 Frankfurt am Main, Germany 
Phone: +49-69-1366 0 

JP Morgan AG 
﷟TaunusTurm, Taunustor 1, 60310 Frankfurt am Main, Germany 
Phone: +49.69.7124.1601 

Goldman Sachs
﷟Friedrich-Ebert-Anlage 49, 60308 Frankfurt am Main, Germany 
Phone: +49-69-7532 1000 

Merrill Lynch International 
﷟Main Tower, Neue Mainzer Straße 52, 60311 Frankfurt am Main, Germany 
Phone: +49-69-5899 5000 

Morgan Stanley 
﷟Junghofstr. 13-15, 60311 Frankfurt am Main, Germany 
Phone: +49-69-2166-0 

Silicon Valley Bank   
Guiollettstraße 48, 60325 Frankfurt am Main, Germany 
Phone: +49-69-7158-950 

State Street Bank International GmbH 
Solmsstraße 83, 60486 Frankfurt am Main, Germany 
Phone: +49 -69-6677-45000

Wells Fargo
An der Hauptwache 7, 60313 Frankfurt am Main, Germany 
Phone: +49-69-2980-2700 

Project Financing 

Germany possesses the financial framework and institutions to support the development of large infrastructure projects. However, the volume of project finance operations has been relatively modest in Germany in comparison to that of other EU countries, particularly the U.K. and France. Although the relatively high debt levels of the German federal government and local authorities would seem to favor this type of financing, difficult economic conditions have also limited anticipated rates of return for potential project finance developers. Other inhibiting factors are Germany’s complex juridical and federal frameworks, which make project-financed works harder to structure than in other countries. Low interest rates and returns on savings have contributed to an improved investment climate. One area that has attracted project finance, including that involving a few U.S. developers and investors, is alternative energy production. Clean and renewable energy projects have gained prominence in Germany, particularly since the decision in 2011 to accelerate the phase-out of nuclear energy by 2022 and the decision in June 2020 to end coal power generation in Germany by 2038, at the latest. 

The principal German institutions active in facilitating project finance deals are the state-owned KfW Bank Group  (which plays a major role in most industries), commercial banks such as  Commerzbank, and several of the  publicly-owned  savings banks controlled by state and local governments  and  state development banks (“Förderbanken”,  in German), such as  WIBank  in Hesse, NRW Bank in North Rhine-Westphalia, LFA  Förderbank  Bayern,  Investitionsbank  Berlin (IBB), among others.  The  KfW  Group includes  KfW  IPEX-Bank, which supports a  consortium  with German members to design and finance infrastructure projects in Germany and overseas, and  KfW  Capital, launched in October 2018 to develop the VC and VD funding landscape in Germany and Europe. Another group member,  KfW  Development Bank, helps municipalities finance infrastructure. German insurers are pressing for regulatory changes to enable them to finance infrastructure projects.  

Key Link: European Bank for Reconstruction and Development (EBRD) 
Key Link: U.S. Commercial Service Liaison Office to the EBRD