Abstract
The German financial system has historically been a prime example of a bank-based system although, in contrast to most other developed capitalist countries, a significant part of the banking system has consisted of publically-owned savings banks and cooperative banks that are not driven primarily by the search for profits. Big private banks had traditionally functioned as house banks to big industrial companies, but investment and borrowing by industry declined after the 1970s. In the mid-1980s, the big private banks responded by promoting the development of securities markets in Germany with the aim of increasing their earnings from investment banking activities. This has resulted in some strengthening of the role of securities markets since the 1990s, although banks continue to occupy a predominant position in the German financial system. Amongst non-bank financial institutions, insurance companies have historically been the most significant, although investment funds expanded very rapidly in the 1990s, and are now almost as large. Pension funds have been much less significant. Highly leveraged financial institutions, such as hedge funds and private equity funds, have also had a relatively limited presence in Germany.
This is a preview of subscription content, log in via an institution.
Buying options
Tax calculation will be finalised at checkout
Purchases are for personal use only
Learn about institutional subscriptionsNotes
- 1.
In May 2012 Deutsche Bank agreed to pay 202 million dollars to settle charges that it defrauded the US government over the resale of risky mortgages (BBC News, 10 May 2012). Other fines include 553 million dollars by the Department of Justice for tax-oriented transactions for clients between 1996 and 2002 (Financial Times, 21 December 2010); 7.5 million dollars by the US Financial Industry Regulatory Authority for negligently misrepresenting delinquency rates on subprime related securities it sold (Wall Street Journal, 22 July 2010); 2.5 million pound in fines and compensation imposed by the British Financial Services Authority for irresponsible lending mortgage practices (Financial Times, 22 February 2011); and 887,000 dollars by the Korean Financial Services Commission for manipulating the country’s stock market (BBC, 25 February 2010).
- 2.
There are independent savings banks in Hamburg, Frankfurt, Bremen and Dresden which are self controlled, and which were not covered by state guarantees, but which otherwise fit in this sector (Hackethal 2004, p. 79).
- 3.
At the height of the financial crisis in late 2008, the BBC reported that concerned citizens were withdrawing their deposits from the big private banks and opening accounts at the Sparkasse in central Berlin’s Friedrichstraße.
- 4.
There is also some cross-ownership between the Landesbanken . For details of the ownership structure see IMF (2012, p. 6).
- 5.
However, the legal status of Eurohypo (renamed to Hypothekenbank Frankfurt AG in 2012) was transformed into a non-bank firm and rebranded to LSF Loan Solutions Frankfurt GmbH in 2016.
- 6.
Hamburg and Hannover, Berlin and Bremen, Dusseldorf, Munich, and Stuttgart.
- 7.
Our own attempts to replicate the European Central Bank ’s estimates of the size of the shadow banking sector indicated that for Germany the figure was around 500 billion euros in 2010 and 2011, which is even smaller than the Bundesbank figure.
- 8.
The figure for money market funds had stood at 33 billion euros in 2006, but following the onset of the financial crisis in 2007 there was a large outflow of funds, partly due to the turmoil in US money market funds .
References
Bakk-Simon K, Borgioli S, Girón C, Hempell H, Maddaloni A, Recine F, Rosati S (2012) Shadow banking in the Euro area. Occasional paper series no 133. European Central Bank, Frankfurt am Main
Deeg R (1999) Finance capitalism unveiled: banks and the German political economy. University of Michigan Press, Ann Arbor
Deutsche Bundesbank (2011) Die Ertragslage der deutschen Kreditinstitute. Monatsbericht September 2011. Deutsche Bundesbank, Frankfurt am Main
Deutsche Bundesbank (2012a) The shadow banking system: small in Germany, but globally connected. Financial stability review 2012. Deutsche Bundesbank, Frankfurt am Main
DZ Bank (2008) ABS & structured credits—ABCPS—back to the roots? August. DZ bank AG
Eurex (2012) Eurex - corporate structure. http://www.eurexchange.com/exchange-en/about-us/corporate-overview/organizational-structure/139878. Accessed 5 Mar 2012
FT (2012) Deutsche hid €12bn losses, Financial times, 6 Dec 2012
Hackethal A (2004) German banks and banking structure. In: Krahnen JP, Schmidt RH (eds) The German financial system. Oxford University Press, Oxford
Höpner M, Lothar K (2006) Ein Netzwerk in Auflösung: Wie die Deutschland AG zerfällt. Max Planck Institute for the Study of Societies, Köln, Max-Planck-Institut für Gesellschaftsforschung (MPIfG) Manuscript
IMF (2011) Germany: banking sector structure. Technical note for IMF country report no 11/370. International Monetary Fund, Washington
IMF (2012) Global financial stability report. Statistical Appendix, International Monetary Fund, Washington
Karsch W (2011) Finanzkrise hinterlässt Spuren – Top 100 der Kreditwirtschaft. Die bank 8
Reszat B (2003) Financial reform in Germany. In: Hall M (ed) The international handbook on financial reform. Edward Elgar, Cheltenham
Theissen E (2004) Organised equity markets. In: Krahnen JP, Schmidt RH (eds) The German financial system. Oxford University Press, Oxford
Vitols S (2004) Changes in Germany’s bank-based financial system: a varieties of capitalism perspective. WZB markets and political economy working paper no SP II 2004–03. Wissenschaftszentrum Berlin für Sozialforschung, Berlin
Data Sources
Deutsche Bundesbank (2012b) Time series data base, Frankfurt. http://www.bundesbank.de/Navigation/EN/Statistics/Time_series_databases/Macro_economic_time_series/macro_economic_time_series_node.html. Accessed 5 Aug 2012
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2017 Springer International Publishing AG
About this chapter
Cite this chapter
Detzer, D., Dodig, N., Evans, T., Hein, E., Herr, H., Prante, F.J. (2017). The Institutional Structure of the German Financial System. In: The German Financial System and the Financial and Economic Crisis. Financial and Monetary Policy Studies, vol 45. Springer, Cham. https://doi.org/10.1007/978-3-319-56799-0_4
Download citation
DOI: https://doi.org/10.1007/978-3-319-56799-0_4
Published:
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-56798-3
Online ISBN: 978-3-319-56799-0
eBook Packages: Economics and FinanceEconomics and Finance (R0)