IDEAS home Printed from
MyIDEAS: Login to save this article or follow this journal

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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
Download Restriction: Full text for ScienceDirect subscribers only

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

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

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

in new window

Handle: RePEc:eee:quaeco:v:52:y:2012:i:2:p:123-134
Contact details of provider: Web page:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Freixas, Xavier & Loranth, Gyongyi & Morrison, Alan D., 2007. "Regulating financial conglomerates," Journal of Financial Intermediation, Elsevier, vol. 16(4), pages 479-514, October.
  2. Douglas W. Diamond & Raghuram G. Rajan, 2000. "A Theory of Bank Capital," Journal of Finance, American Finance Association, vol. 55(6), pages 2431-2465, December.
  3. Falko Fecht, 2004. "On the Stability of Different Financial Systems," Journal of the European Economic Association, MIT Press, vol. 2(6), pages 969-1014, December.
  4. Ralf Bebenroth & Diemo Dietrich & Uwe Vollmer, 2009. "Bank regulation and supervision in bank-dominated financial systems: a comparison between Japan and Germany," European Journal of Law and Economics, Springer, vol. 27(2), pages 177-209, April.
  5. David Martinez-Miera & Rafael Repullo, 2010. "Does Competition Reduce the Risk of Bank Failure?," Review of Financial Studies, Society for Financial Studies, vol. 23(10), pages 3638-3664, October.
  6. Ulrich Blum & Diemo Dietrich, 2010. "Bankenabgabe: Richtig oder gar nicht!," Wirtschaft im Wandel, Halle Institute for Economic Research, vol. 16(5), pages 234-237.
  7. Michael D. Bordo & Angela Redish, 1996. "A Comparison of the Stability and Efficiency of the Canadian and American Banking Systems 1870-1925," NBER Historical Working Papers 0067, National Bureau of Economic Research, Inc.
  8. Petersen, Mitchell A & Rajan, Raghuram G, 1995. "The Effect of Credit Market Competition on Lending Relationships," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 407-43, May.
  9. Reint Gropp & Hendrik Hakenes & Isabel Schnabel, 2010. "Competition, Risk-Shifting,and Public Bail-out Policies," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2010_05, Max Planck Institute for Research on Collective Goods.
  10. Diemo Dietrich & Uwe Vollmer, 2006. "Banks’ Internationalization Strategies: The Role of Bank Capital Regulation," IWH Discussion Papers 18, Halle Institute for Economic Research.
  11. João A. C. Santos, 1998. "Commercial banks in the securities business: A review," BIS Working Papers 56, Bank for International Settlements.
  12. Bernanke, Ben S, 1983. "Nonmonetary Effects of the Financial Crisis in Propagation of the Great Depression," American Economic Review, American Economic Association, vol. 73(3), pages 257-76, June.
  13. Kroszner, Randall S & Rajan, Raghuram G, 1994. "Is the Glass-Steagall Act Justified? A Study of the U.S. Experience with Universal Banking before 1933," American Economic Review, American Economic Association, vol. 84(4), pages 810-32, September.
  14. Richard Tilly, 1998. "Universal Banking in Historical Perspective," Journal of Institutional and Theoretical Economics (JITE), Mohr Siebeck, Tübingen, vol. 154(1), pages 7-, March.
  15. Keeley, Michael C, 1990. "Deposit Insurance, Risk, and Market Power in Banking," American Economic Review, American Economic Association, vol. 80(5), pages 1183-1200, December.
  16. Douglas W. Diamond & Raghuram G. Rajan, 1998. "Liquidity risk, liquidity creation and financial fragility: a theory of banking," Proceedings, Federal Reserve Bank of San Francisco, issue Sep.
  17. Franklin Allen & Douglas Gale, 2004. "Financial Intermediaries and Markets," Econometrica, Econometric Society, vol. 72(4), pages 1023-1061, 07.
  18. 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.
  19. Stein, Jeremy C, 1997. " Internal Capital Markets and the Competition for Corporate Resources," Journal of Finance, American Finance Association, vol. 52(1), pages 111-33, March.
  20. Diamond, Douglas W, 1984. "Financial Intermediation and Delegated Monitoring," Review of Economic Studies, Wiley Blackwell, vol. 51(3), pages 393-414, July.
  21. repec:cup:cbooks:9780521709309 is not listed on IDEAS
  22. Georg Rich and Christian Walter, 1993. "The Future of Universal Banking," Cato Journal, Cato Journal, Cato Institute, vol. 13(2), pages 289-313, Winter.
  23. Diamond, Douglas W & Dybvig, Philip H, 1983. "Bank Runs, Deposit Insurance, and Liquidity," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 401-19, June.
  24. Randall S. Kroszner & Raghuram G. Rajan, 1995. "Organization Structure and Credibility: Evidence from Commercial Bank Securities Activities Before the Glass-Steagall Act," NBER Working Papers 5256, National Bureau of Economic Research, Inc.
  25. repec:cup:cbooks:9780521855761 is not listed on IDEAS
  26. Franklin Allen & Douglas Gale, 2004. "Competition and financial stability," Proceedings, Federal Reserve Bank of Cleveland, pages 453-486.
  27. White, Eugene Nelson, 1986. "Before the Glass-Steagall Act: An analysis of the investment banking activities of national banks," Explorations in Economic History, Elsevier, vol. 23(1), pages 33-55, January.
  28. George J. Benston, 1994. "Universal Banking," Journal of Economic Perspectives, American Economic Association, vol. 8(3), pages 121-143, Summer.
  29. Boot, Arnoud W. A. & Schmeits, Anjolein, 2000. "Market Discipline and Incentive Problems in Conglomerate Firms with Applications to Banking," Journal of Financial Intermediation, Elsevier, vol. 9(3), pages 240-273, July.
  30. Ferreira, Miguel A. & Matos, Pedro, 2009. "Universal banks and corporate control: evidence from the global syndicated loan market," Working Paper Series 1066, European Central Bank.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:eee:quaeco:v:52:y:2012:i:2:p:123-134. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.