Germany is a central European country with fourth largest economy in the world after the US, Japan and China. It has 82 million consumers and has a nominal GDP of $ 3.352 trillion. Financial system in Germany is a traditional banks based system. Firms still rely on banks instead of capital markets.
In this paper we will analyze the banking system of Germany, its main institutional investors, the Stock and Bond markets and finally the affects of financial crisis in financial sectors and the implementation of Basel II nationally.
Table of Contents
1) Introduction
2) Banking System in Germany
2.1) Private Commercial Banks
2.1.1) Regional Banks
2.1.2) Foreign Banks
2.2) Loan and Saving Associations
2.3) Co-operative Banks
3) Institutional Investors
3.1) Insurance Companies
3.2) Investment Funds
3.2.1) Open-end Funds
3.2.2) Closed-end Funds
4) Stock and Bond Market
4.1) Stock Market
4.2) Bond Market
5) Financial Crisis of 2008 and Basel II
Research Objectives and Key Topics
This paper aims to provide a comprehensive analysis of the German financial system, examining its structure, the role of banking institutions, and the impact of the 2008 financial crisis in conjunction with the implementation of Basel II.
- The traditional, bank-based financial system of Germany.
- The three-pillar banking structure including commercial, public, and cooperative banks.
- The landscape of institutional investors, focusing on insurance companies and investment funds.
- Mechanisms and performance of the domestic Stock and Bond markets.
- Policy responses to the 2008 financial crisis and regulatory adjustments.
Excerpt from the Book
2. Banking System in Germany
Germany has one of the largest banking systems in the world. The whole financial system is dominated by the banks. Other than in the United States, bank credits are very important in financing the firms than other ways. German banks have assets totaling 300% of GDP2. Measuring in terms of Balance Sheet, the German private commercial banks only have a small share of market. The top four private banks Deutsche Bank, Commerzbank, Dresdner Bank and Bayersiche Hypo Vereinsbank together only account for 16% of total market.
Deutsche Bundesbank is the central bank of Germany, which, as every other central bank of any country, focuses on maintaining Price stability, managing the financial and monetary system, banking supervision, cash management etc. The European Central Bank (ECB) also plays a very important role, it’s the central bank for Europe’s single currency. Its main task is to maintain the purchasing power of Euro and create price stability in 16 countries which have the common currency.
The German Banking System is structured in three pillar system:
2.1) Private Commercial Banks: (Example: Deutsche Bank, Commerzbank, Dresdner Bank etc). In terms of Bank Balance sheet, these are major banks but their market share is not high in overall volume. These banks also have branches in foreign countries. Within private commercial banks, there are again two types:
2.1.1) Regional Banks: These banks provide banking services in their particular region but some also have branches operating in interregional or national level.
Chapter Summaries
1) Introduction: Provides an overview of the German economy and sets the scope for analyzing its bank-based financial system, institutional investors, and capital markets.
2) Banking System in Germany: Details the three-pillar structure of German banking, covering private commercial banks, publicly-owned loan and saving associations, and cooperative banks.
3) Institutional Investors: Examines the role of insurance companies and investment funds as specialized financial mediators in the German market.
4) Stock and Bond Market: Analyzes the composition and performance of the stock exchanges and the bond market, highlighting the prevalence of bank-issued debt.
5) Financial Crisis of 2008 and Basel II: Discusses the effects of the global financial crisis on Germany and the subsequent integration of Basel II regulatory standards into national law.
Keywords
Germany, Financial System, Banking System, Private Commercial Banks, Insurance Companies, Investment Funds, Stock Market, Bond Market, Financial Crisis 2008, Basel II, Bundesbank, ECB, Pfandbriefe, Monetary System, Capital Markets.
Frequently Asked Questions
What is the primary subject of this research paper?
This paper examines the structure and functioning of the financial system in Germany, with a focus on banking, institutional investments, and capital market performance.
What are the central thematic fields covered?
The key themes include the three-pillar banking system, the role of insurance and investment fund sectors, the characteristics of the German stock and bond markets, and the influence of international financial regulations.
What is the main objective of the analysis?
The goal is to analyze how Germany's traditional bank-based financial system operates, how it interacts with institutional investors, and how it has navigated the 2008 financial crisis.
Which scientific methods are utilized?
The paper uses an analytical and descriptive approach, reviewing institutional structures, statistical market data, and regulatory frameworks to explain the current state of the German financial sector.
What content is discussed in the main body?
The main body breaks down the banking hierarchy (commercial, savings, and cooperative banks), evaluates the insurance and investment fund markets, and provides an overview of the German Stock and Bond market mechanisms.
Which keywords characterize this paper?
Key terms include Financial System of Germany, Banking System, Institutional Investors, Stock Market, Bond Market, and Basel II regulations.
How does the German banking system differ from the US model?
Unlike the US, where capital markets play a more dominant role, Germany is characterized by a traditional bank-based system where bank credits are the primary source of firm financing.
What is the significance of the 'Pfandbriefe' mentioned in the text?
Pfandbriefe are specialized mortgage-backed or communal bonds that provide security to investors, serving as a distinct instrument within the German capital market.
How was the Basel II regulation implemented in Germany?
Basel II was integrated into national law through amendments to the German Banking Act and the introduction of specific solvency regulations, supported by cooperation between the Bundesbank, BaFin, and the banking industry.
- Quote paper
- Bikal Dhungel (Author), 2010, Financial System of Germany, Munich, GRIN Verlag, https://www.hausarbeiten.de/document/170912
