Classical, Early, and Medieval Plays and Playwrights: Classical, Early, and Medieval Poetry and Poets: Classical, Early, and Medieval Prose and Writers: Classical, Early, and Medieval World History: Civil War American History: Users without a subscription are not able to see the full content. Krahnen and Reinhard H. Schmidt Abstract The book provides a comprehensive and up-to-date overview of all aspects of the German financial system, grounded in the current discussion about the importance of a country's financial system for its economic development.
Bibliographic Information Print publication date: Authors Affiliations are at time of print publication. Credit unions and cooperatives are in essence the same thing, though cooperatives tend to be larger.
Jan P. Krahnen and Reinhard H. Schmidt
In Germany today some 18 million people, or one in four adults, belong to a credit union. And the idea has spread. Some million people around the world belong to cooperatives, and there are even about 6, scattered around the United States. The savings banks in the second tier have been copied less and remain more uniquely German, although Cuba and Ireland are interested in importing the concept.
The german financial system
Credit unions and savings banks have a few things in common. Both are part of networks of cross-guarantees to protect savers in the event that one of them goes bust. And both have mandates that emphasize maximizing the welfare of their members or stakeholders rather than making profit.
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In the case of savings banks, this means giving back to the municipality that owns the bank. Savings banks typically sponsor local festivals, finance local hospitals and universities and so forth. All this might sound like a leftist dream — putting communities or democratically elected governments in charge of money-lending rather than greedy private bankers.
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Take the financial crisis. Some of the culprits were private banks like Commerzbank and Deutsche Bank.
But the state-backed Landesbanken had also strayed beyond their allegedly conservative remits, investing in shady American mortgage-backed securities and pouring money into Greece, Spain and Portugal during their boom years. Those exposures were considered risks to the whole banking system and therefore required billions in taxpayer bailouts.
The German financial system and European monetary union - ScienceDirect
He thinks the Landesbanken got in trouble precisely because they were being watched over by public officials who had no real expertise in banking. Now a more chronic malaise ails the savings banks and cooperatives. Proudly traditional, they are not exactly fast innovators.
The credit unions have instead responded by pooling their resources. As of last year, 1, of them have formed a single national cooperative , called DZ Bank, which acts as a sort of central bank for them. The community savings banks have done less consolidating, but have also formed eight regional mortgage banks, eleven insurers and one asset manager DekaBank.
But Germany remains vastly overbanked. For its financial system to function properly, about one third of banks need to disappear in the next decade, according to estimates by Bain. This could mean that an entire tier will collapse or merge, or that each tier shrinks.