Chapter 11: Germany’s Three-pillar Banking System from a Corporate Governance Perspective
Horst Gischer, Peter Reichling and Mike Stiele Compared to other countries the organization of the German banking system is almost unique. The coexistence of diﬀerent institutional groups with almost identical business segments often leads to the presumption that a change of the institutional conditions may release signiﬁcant capabilities of eﬃciency, from which in turn bank customers beneﬁt (Brunner et al., 2004). In this chapter we attempt to justify the fundamental structure of the banking system in Germany. We show from a corporate governance perspective that the coexistence of ﬁnancial institutions with diﬀerent business strategies and in many areas diﬀering clienteles ﬁts best to the regional requirements in Germany. COMPARISON OF CORPORATE GOVERNANCE SYSTEMS Authors with an Anglo-Saxon focus often have a diﬀerent understanding of corporate governance compared to authors with a continental European background. For explanatory purposes it is helpful to compare the AngloSaxon corporate governance system with the continental European system. We will proceed rather stereotypically so that the major diﬀerences become apparent.1 The Anglo-Saxon literature on corporate governance mostly deals with the relationship between top management and shareholders of a company. Consequentially from this point of view the main task of management is to increase the equity’s (market) value, this is the shareholder value. This focus also motivates a one-tier board that consists of internal executives and nonexecutive outside directors, the latter rather acting as consultants (to in turn increase the shareholder value) and merely monitoring that managers do not...
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