Corona pandemic, war in Ukraine, energy crisis: The state development bank KfW has to step in again and again with rescue billions. The institute, which was founded 75 years ago, is in high demand – and this is unlikely to change any time soon. Acting CEO Stefan Wintels predicts a “decade of decisions” in which the course will be set for “the conditions under which our children and grandchildren will live in the future”. To kick off the anniversary year, KfW is hosting a reception in Frankfurt this Tuesday (6.30 p.m.) at which Federal Finance Minister Christian Lindner (FDP) is expected to attend.

Although the Frankfurt-based KfW has no branches and no customer deposits, it still plays an important role in the economy. The banking group with more than 7600 employees (as of 2021) provides medium-sized companies, home builders and students with low-interest loans. Developing and emerging countries are supported by KfW Development Bank and the German Investment and Development Company (DEG). The subsidiary KfW Capital, which started work in 2018, is intended to provide start-ups with capital for their expansion.

Crisis fire brigade even in Corona times

Again and again, politicians take advantage of the promotional institute, which is 80 percent owned by the federal government and 20 percent by the federal states: After reunification, the bank helped to “build up the East”. Again and again, the federal government parked blocks of shares from former state-owned companies such as Post and Telekom at KfW. In the Corona crisis, KfW, together with banks and savings banks, helped companies with loans that got into difficulties because of the pandemic. More than 155,000 small and medium-sized companies were supported at the time. Like the federal government, the development bank can borrow money on the capital markets on comparatively favorable terms. KfW can even do this outside of budgetary discipline and the debt brake.

The then Kreditanstalt für Wiederaufbau (KfW) began its work when the KfW Law came into force on November 18, 1948. After the Second World War, the Americans and British gave the institute the task of rebuilding a devastated Germany with funds from the Marshall Plan. With cheap loans for industry, KfW laid the foundation for the German economic miracle.

“The small-chested post-war child has become a powerful institute,” said Gert Vogt, spokesman for the KfW board at the time, on the institute’s 50th anniversary. The Institute will not be short of tasks in the future either. As an “investment and innovation agency”, the traffic light coalition has assigned KfW an important role in dealing with future tasks: energy transition, climate change, digitization and the promotion of innovation.

Don’t forget to make money

Even if it is not their main task, earning money is one of them for KfW. “Our aspiration level is to earn around one billion euros a year,” said KfW boss Wintels recently. The investment banker and long-time Citigroup manager started his job at the development bank in autumn 2021.

However, the development bank did not get through the years without any problems. The participation in the Mittelstandsbank IKB burdened KfW and thus the taxpayers with around ten billion euros. The IKB had speculated on the market with US mortgages. In September 2008, the development bank again made negative headlines: a transfer of 320 million euros to Lehman Brothers on the day the US investment bank filed for bankruptcy earned KfW the ridicule of “Germany’s stupidest bank”. The then Federal Finance Minister Peer Steinbrück (SPD) grumbled: “With such an idiotic transfer – even my 89-year-old mother freaks out.”

A few months after taking office, Wintels also experienced how stressful business at the interface between politics and business can be. The abrupt stop of the funding programs for energy-efficient buildings in January 2022 caused trouble. “I give you my word that an application freeze will not happen again,” Wintels assured later.

The seemingly anachronistic term “institute” has disappeared from the development bank’s name for more than 20 years. At the turn of the millennium, the Reconstruction Loan Corporation became the KfW Banking Group. The institute, which was often perceived as conservative in the past, is proud to point out that half of the board of directors, which will soon be composed of six again, is now made up of half women.