As widely recognized, financial systems play an important role for economic growth. The German as well as the American economy seemed to be both very successful over the last decade in terms of GDP growth. Although both economies are successful, their financial systems differ widely. While the American system is strongly capital market-based, banks play the dominant role in the German financial system. As it was for a long time a purely bank-based system, it represented a unique financial system around the world.
In this paper, I will point out the main features of the traditional German financial system. I will mainly focus on the role and structure of the financial sector, financing patterns of firms, and the German corporate governance system. So far, most academic literature has concentrated on the peculiarities of the “old” German financial system. In the following paper, recent developments will also be included. Major changes and trends of the German financial system since the begin-nings of the 2000s will be outlined, leading to the question if the system underwent a process of transformation from a bank-based to a capital market-based financial system.
I will begin with a brief summary of the basic definitions, concepts and classifications that are necessary to describe and analyze the German financial system. In chapter 3, the “old” German financial system, called an international prototype of a bank-based system, is outlined. After ex-plaining the main elements of the “old” German financial system focusing on the financial sector, financing patterns of firms and the corporate governance system, recent changes and develop-ments since the 2000s will follow in chapter 4. Within chapter 4, the current state of the German financial system will be described with an emphasis on developments that could have led to a transformation to a capital market-based system. This description leads to the conclusion in chapter 5 that the German financial system has not transformed to capital market-based system and kept its unique peculiarities but is no longer a purely bank-based financial system.
Inhaltsverzeichnis (Table of Contents)
- Introduction
- Definitions, Concepts and Classifications
- Definitions & importance of financial systems
- Bank-based & capital market-based financial systems
- Outsider & insider controlled corporate governance systems
- Evolution of financial systems over time
- The “traditional” German financial system until the 2000s
- The financial sector
Zielsetzung und Themenschwerpunkte (Objectives and Key Themes)
This paper examines the features of the traditional German financial system, focusing on the role and structure of the financial sector, financing patterns of firms, and the German corporate governance system. The paper also explores recent changes and trends in the German financial system since the early 2000s, leading to the question of whether the system has undergone a transformation from a bank-based to a capital market-based system. Key themes:- Structure and characteristics of the German financial system
- Role of banks and capital markets in the German financial system
- Financing patterns of German firms
- Corporate governance system in Germany
- Evolution of the German financial system and potential transformation
Zusammenfassung der Kapitel (Chapter Summaries)
The introduction lays out the paper's objectives, highlighting the importance of financial systems for economic growth and the distinction between the German and American systems. It introduces the focus of the paper on the traditional German financial system, its recent developments, and the potential transformation from a bank-based to a capital market-based system. Chapter 2 defines key concepts related to financial systems, including the importance of financial systems, the distinction between bank-based and capital market-based systems, and the contrasting models of outsider and insider-controlled corporate governance. It introduces the common view that financial systems evolve from bank-based to capital market-based systems, setting the stage for analyzing the potential transformation of the German system. Chapter 3 describes the traditional German financial system as a purely bank-based and insider-controlled system. This chapter details the dominant role of banks in the financial sector, the financing patterns of firms, and the stakeholder-oriented corporate governance system, highlighting the features that distinguish the German system from others.
Schlüsselwörter (Keywords)
This paper explores the key features of the German financial system, examining its history, evolution, and potential transformation. It focuses on the crucial elements of bank-based financial systems, corporate governance, and financing patterns, as well as the ongoing debate about whether the German system is shifting towards a capital market-based model. Key concepts include the "housebank principle," universal banking, stakeholder orientation, insider control, and the potential for transformation within the German financial system.- Quote paper
- Tobias Albrecht (Author), 2013, The german financial system, Munich, GRIN Verlag, https://www.grin.com/document/269477
