The consequences of international crises and conflicts are increasingly challenging the financial sector. Even small savings banks have to deal with the consequences such as growing volatility and uncertainty as well as increased non-financial and financial risks – right up to the question of war and peace.

„Geopolitics is becoming an increasing concern for savings banks,“ Thomas Hirsch, President of the Rhineland-Palatinate Savings Banks Association (SVRP), says in an interview with Börsen-Zeitung. „How we create resilience for crisis situations must also concern the Savings Banks Finance Group,“ he says, especially as it has a special responsibility as part of the critical infrastructure.

And not only in the question of staffing in the event of a crisis or conflict, but also in risk management or bank management. „The ECB is calling for greater consideration to be given to geopolitical risks in this regard,“ says Hirsch, whose regional association represents 20 savings banks in Rhineland-Palatinate, with total assets of 77 billion euros and 10,300 employees, as well as the municipal owners.

He particularly focusses on the facets of Russia's hybrid warfare, which uses cyber attacks, sabotage, and disinformation campaigns to unsettle the population and sow doubts about the provision of critical infrastructure such as energy, food and financial services.

He uses the coronavirus pandemic, in which the security of supply came into focus, to illustrate just how delicate this is. „We have seen how quickly our structures, which we thought were secure, can be shaken - and not just when it comes to supplies of pasta or toilet paper.“

And even if, for example, ATM blasts are not hybrid attacks by Russia, but organised crime, this shows how sensitively the population reacts to such events. Nevertheless, Hirsch considers the Savings Banks Finance Group to be well protected when it comes to cyber attacks, as its IT service provider Finanz Informatik (FI) is a bulwark against such attacks.

One aspect that is still being neglected in the current security policy debate is the question of human resources in companies in the event of an attack. By the end of the decade, Russia could be in a position to attack the NATO alliance area, possibly in the Baltic region, Hirsch points to assessments by Western military and intelligence services. „If a war were to break out in Eastern Europe, Germany would be a deployment, transit and logistics area.“

This has consequences for the many employees of the savings banks who are engaged in civil defence, in the volunteer fire brigade, in the rescue service or in the THW, or even as reservists in the Bundeswehr, says Hirsch: „In the event of war or a crisis, at least some of them would no longer be available to the savings banks. 20 to 30% of the workforce could be missing. It is questionable whether service operations could still be maintained under these circumstances.“

This is all the more true as the personnel situation is already strained due to demographic change. Nevertheless, he is in favour of encouraging employees as employers to get involved in civil defence or homeland security – knowing full well that they may not be available to the savings bank in the event of an emergency.

In this context, Hirsch welcomes the German government's hundreds of billions of euros financial packages for infrastructure and security, which he expects to have a noticeable impact from 2026. „We need investment in defence, because we are not in a good position here,“ he says. This also applies to transport infrastructure. „For example, can our bridges carry tanks? No. But that's necessary, because it's no use to us if they're in the wrong place in the event of defence.“

In general, the former mayor of Landau is pleased that there is clearly a political will to tackle the major problems in society. Hirsch also includes the issues of old-age provision and housing construction, which are of enormous importance for social cohesion. The financial group wants to make a tangible contribution here, he says. „The savings banks are at the ready when it comes to financing investments by companies, housing construction and public infrastructure.“

When it comes to the question of how to measure geopolitical risks, Hirsch points to the resourcefulness of the regulators: „I'm sure they will come up with something. After all, new key figures are always being devised or additional capital buffers imposed in order to reduce risks. We also have to be prepared for this with regard to geopolitical risks.“

Every institution needs to diversify even more and pay attention to which risks it could potentially be exposed to. „As we have already seen in the discussions about sustainability, it may mean that one or two transactions are foregone.“ For example, geopolitical considerations could mean that a medium-sized customer wishing to invest in the Baltic States, for example, is denied the necessary financing.

In view of the increasing geopolitical challenges and regulatory requirements, Hirsch advises savings banks to exercise restraint. When weighing up whether they should pay out dividends to their owners or rather retain them, he has clear ideas: it is better to keep the money together.

Especially as profit distributions have a direct impact on future lending opportunities. „A distribution of 1 million euros corresponds to a total of 20 million euros less in housing construction financing or 12 million euros less in corporate loans, given the necessary equity backing,“ explains Hirsch, referring to the business that the savings banks would miss out on if they were very generous to the municipalities as sponsors.

„It would be fatal to try to alleviate the municipal financial crisis with a trickle on the one hand, but have a sea of disadvantages on the other,“ warns the savings bank president. „Of course, distributions are possible if the overall situation of the savings bank allows this without hesitation. However, the focus must be on what the savings bank needs - not only today, but also the day after tomorrow.“

Thomas Hirsch has led the Rhineland-Palatinate Savings Banks Association (SVRP), based in Mainz, for almost two and a half years. Before taking on the „very fulfilling task“ as President of one of the twelve regional savings banks and giro associations in Germany, he spent seven years as Lord Mayor of Landau in der Pfalz, his home town with a population of just under 50,000. Next year, he will have worked in the public sector for 40 years, 25 of them in management positions.

After working in the district administration of Südliche Weinstraße, the graduate in public administration moved to the administration of the city of Landau in 1990, where he worked his way up from head of the press office to managing the city holding company to Lord Mayor.

Hirsch is married and has two sons. The centre of his life is still in the Southern Palatinate, near Landau. In his free time, he enjoys hiking in the Palatinate Forest or in the mountains when he is not travelling with his family, which includes three granddaughters.