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Are universal banks bad for financial stability? Germany during the world financial crisis

  • Dietrich, Diemo
  • Vollmer, Uwe

This case study explores the contribution of universal banking to financial stability in Germany during the recent financial crisis. Germany is a prototype for universal banking and has suffered from a rather small number of banking crises in the past. We review the banking literature and analyze the major institutional and regulatory features of the German financial system to establish a nexus between universal banking and stability. We focus on the following questions. First, which banks failed and did they because they were universal or because of other reasons? Second, which types of distress beside outright bank failures resulted from the crisis and how did German universal banks dealt with them? We show that only few German banks failed and these banks did so not because they were universal banks but because they were publicly owned. Most banks instead contributed to reduce the impact of the recent crisis.

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Article provided by Elsevier in its journal The Quarterly Review of Economics and Finance.

Volume (Year): 52 (2012)
Issue (Month): 2 ()
Pages: 123-134

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Handle: RePEc:eee:quaeco:v:52:y:2012:i:2:p:123-134
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620167

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  1. Xavier Freixas & Gyöngyi Lóránth & Alan D. Morrison, 2005. "Regulating Financial Conglomerates," OFRC Working Papers Series 2005fe03, Oxford Financial Research Centre.
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  12. Diemo Dietrich & Achim Hauck, 2012. "Government interventions in banking crises: effects of alternative schemes on bank lending and risk taking," Scottish Journal of Political Economy, Scottish Economic Society, vol. 59(2), pages 133-161, 05.
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