The Hausbank System in the East after GEMSU

In the preceding chapters, we found that after GEMSU the banking sector in the East quickly transformed itself to resemble the one in West Germany in terms of institutional structure and infrastructure (Chapter 4). Yet alongside the rapid development — ‘normalisation’ — of the banking sector and bank lending activities, as well as significant levels of financial flows (Chapter 5) and other advantages present in the transition in the East (Chapter 3), many East German borrowers complained of financing difficulties (Chapter 5), and accused the banks (particularly the West German banks) of not supporting Mittelstand enterprises in the East. At the same time, four years after GEMSU West German banks were decreasing their loans to manufacturing enterprises — as THA guarantees were removed — and publicly declaring that they had to decrease their overall lending exposure to the East. While the declarations were to a certain extent politically motivated — to demonstrate that banks intended to develop their lending activities but were unable to do so — they signalled the difficulties banks’ faced in credit assessment.