1887

OECD Economics Department Working Papers

Working papers from the Economics Department of the OECD that cover the full range of the Department’s work including the economic situation, policy analysis and projections; fiscal policy, public expenditure and taxation; and structural issues including ageing, growth and productivity, migration, environment, human capital, housing, trade and investment, labour markets, regulatory reform, competition, health, and other issues.

The views expressed in these papers are those of the author(s) and do not necessarily reflect those of the OECD or of the governments of its member countries.

English, French

The German Banking System: Lessons from the Financial Crisis

The German banking system came under pressure during the financial crisis, not least due to its significant exposure to toxic assets which originated in the US. In the short run, the stability of the system has been achieved, in large part through substantial government support measures. However, ensuring adequate capitalization of the banking system remains a major challenge going forward and may require more active government involvement. The underlying causes of the banking sector problems are related to: i) the activities of the Landesbanken which benefitted from government guarantees without a proper business model; ii) weak capitalization and high fragmentation of the whole banking system, possibly related to the particularly rigid three-pillar structure; and iii) deficiencies in banking regulation and supervision. The challenge is to address these three causes in order to raise the long-run stability of the banking system. This paper relates to the 2010 OECD Economic Review of Germany (www.oecd.org/eco/surveys/germany).

English

Keywords: banking sector, Landesbanken, financial crisis, financial stability, banking supervision
JEL: G38: Financial Economics / Corporate Finance and Governance / Corporate Finance and Governance: Government Policy and Regulation; G15: Financial Economics / General Financial Markets / International Financial Markets; G01: Financial Economics / General / Financial Crises; G21: Financial Economics / Financial Institutions and Services / Banks; Depository Institutions; Micro Finance Institutions; Mortgages
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