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Some brokers like trade republic are advertising the investor's deposit is protected under Deposit Guarantee Scheme. But in the same time it keeps mentioning that the deposit is actually in a collective escrow account in a partner bank.

Then this claim looks unclear to me: how can the deposit on a collective escrow account be protected by the guarantee scheme?

  • the amount in this escrow account is well over 100k
  • to be protected an individual needs to be a direct customer of a licenced bank and have an account under their own name. How the individual investor be the direct customer of the any of the partner banks, if it is a escrow account.
  • Investment firm is also exclude from the protection scheme.

Can anyone confirm if their claim (protect up to 100.000 EUR per investor, per bank.) is possible according to the German Deposit Guarantee Scheme? It looks very fishy to me so far.

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Escrow accounts are treated as being from the indiviual, as long as the individiual is revealed to the third bank.

From the FAQ of the Entschädigungseinrichtung deutscher Banken (who is doing the deposit guaranty for Germany):

Bei Treuhandkonten, welche ein Kontoinhaber für einen Dritten angelegt hat, wird hinsichtlich der Deckungssumme nicht auf den Kontoinhaber, sondern auf den Dritten als Einleger abgestellt, sofern das Treuhandverhältnis eindeutig als solches gekennzeichnet ist.

In the case of fiduciary accounts which an account holder has opened for a third party, the covered amount is not based on the account holder but on the third party as the depositor, provided that the fiduciary relationship is clearly identified as such.

So it's certainly possible (and usually the case) to be protected by the deposit guaranty.

But of course you have no real way to check if they do it correctly, or if they even put your money into the escrow account, except trusting them (and the law). You are only protected if the third bank goes bankrupt or runs with your money, not if your broker runs with your money.

Generally, it is worth noting that if you have money in the third bank, and also money with a (or several) broker that has the escrow account with that bank, both amounts count towards your 100k limit at that third bank.

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