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Regulation of the German Financial System

In: The German Financial System and the Financial and Economic Crisis

Author

Listed:
  • Daniel Detzer

    (Berlin School of Economics and Law)

  • Nina Dodig

    (Berlin School of Economics and Law)

  • Trevor Evans

    (Berlin School of Economics and Law)

  • Eckhard Hein

    (Berlin School of Economics and Law)

  • Hansjörg Herr

    (Berlin School of Economics and Law)

  • Franz Josef Prante

    (Berlin School of Economics and Law)

Abstract

The regulatory regime in Germany from the 1930s up to the 1990s could be characterised as a stakeholder-oriented and bank-based model. Regulations stabilised the widespread system of house-banks and the extensive cross-holdings of shares between big financial and industrial companies. Formally, a universal banking system existed, but investment banking was in practice unimportant. This started to change in the 1990s, gained speed following the election in 1998, and triggered a transition to a regime where shareholders’ interests began to gain importance in regulations. From 1995, Germany initiated changes that aimed to move the financial system in the direction of a more Anglo-Saxon type system. Regulatory changes aimed at strengthening the power of shareholders, and at limiting the influence of banks. This has led to a threefold decline in banks’ direct involvement in corporate governance: in the number of bank representatives on company supervisory boards; in banks’ majority ownership in large firms; and in banks’ role in proxy voting. The regulatory changes were promoted by German governments in an attempt to strengthen the position of Germany as a host for international financial markets, and by the European Commission, which pushed for financial market harmonisation in Europe as part of a neo-liberal agenda. However, the German financial system has not changed substantially. Although Germany has clearly been moving away from a purely bank-based model, it has not adopted a market-based one.

Suggested Citation

  • Daniel Detzer & Nina Dodig & Trevor Evans & Eckhard Hein & Hansjörg Herr & Franz Josef Prante, 2017. "Regulation of the German Financial System," Financial and Monetary Policy Studies, in: The German Financial System and the Financial and Economic Crisis, chapter 0, pages 91-109, Springer.
    • Handle: RePEc:spr:fimchp:978-3-319-56799-0_6
    DOI: 10.1007/978-3-319-56799-0_6
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    Citations

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    Cited by:

    1. Leonardo Quero Virla, 2023. "An empirical characterization of volatility in the German stock market," SN Business & Economics, Springer, vol. 3(7), pages 1-19, July.
    2. Herr, Hansjörg & Nettekoven, Zeynep Mualla, 2022. "Macroeconomic effects of the Covid-19 Pandemic in Germany and the European Monetary Union and economic policy reactions," IPE Working Papers 185/2022, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    3. Prante, Franz & Hein, Eckhard & Bramucci, Alessandro, 2021. "Varieties and interdependencies of demand and growth regimes in finance-dominated capitalism," IPE Working Papers 173/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    4. Herr, Hansjörg, 2021. "Macroeconomic transformation of capitalism - How to achieve politically determined growth rates?," IPE Working Papers 170/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    5. Virla, Leonardo Quero, 2021. "An empirical characterization of volatility dynamics in the DAX," IPE Working Papers 167/2021, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    6. Taner Akan & Tim Solle, 2022. "Do macroeconomic and financial governance matter? Evidence from Germany, 1950–2019," Journal of Economic Interaction and Coordination, Springer;Society for Economic Science with Heterogeneous Interacting Agents, vol. 17(4), pages 993-1045, October.

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