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The German Banking System: Lessons from the Financial Crisis

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  • Felix Hüfner

Abstract

The German banking system came under pressure during the financial crisis, not least due to its significant exposure to toxic assets which originated in the US. In the short run, the stability of the system has been achieved, in large part through substantial government support measures. However, ensuring adequate capitalization of the banking system remains a major challenge going forward and may require more active government involvement. The underlying causes of the banking sector problems are related to: i) the activities of the Landesbanken which benefitted from government guarantees without a proper business model; ii) weak capitalization and high fragmentation of the whole banking system, possibly related to the particularly rigid three-pillar structure; and iii) deficiencies in banking regulation and supervision. The challenge is to address these three causes in order to raise the long-run stability of the banking system. This paper relates to the 2010 OECD Economic Review of Germany (www.oecd.org/eco/surveys/germany). Le système bancaire : les leçons de la crise financière Le système bancaire allemand a subi des tensions durant la crise financière, notamment en raison de sa forte exposition à des actifs toxiques générés aux États-Unis. À court terme, la stabilité du système a pu être assurée en grande partie au moyen de mesures substantielles de soutien de la part du gouvernement. Néanmoins, parvenir à une capitalisation convenable du système bancaire reste un défi majeur pour la période à venir et nécessitera sans doute une intervention plus active des pouvoirs publics. Les causes profondes des problèmes du système bancaire sont liées aux facteurs suivants : i) les activités des Landesbanken qui ont bénéficié des garanties de l’État sans avoir de véritable modèle économique ; ii) la capitalisation et la rentabilité médiocres du système bancaire dans son ensemble, éventuellement liée à son organisation particulièrement rigide autour de trois piliers ; et iii) les carences de la réglementation et du contrôle bancaire. Tout le problème consiste à s’attaquer à ces trois causes pour accroître la stabilité de long terme du système. Ce document se rapporte à l’Étude économique de l’Allemagne de l’OCDE, 2010, (www.oecd.org/eco/etudes/allemagne).

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Bibliographic Info

Paper provided by OECD Publishing in its series OECD Economics Department Working Papers with number 788.

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Date of creation: 01 Jul 2010
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Handle: RePEc:oec:ecoaaa:788-en

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Keywords: financial crisis; Landesbanken; financial stability; banking sector; banking supervision; secteur bancaire; Landesbanken; contrôle bancaire; crise financière; stabilité financière;

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