Corporate Governance in Banking

Corporate Governance in Banking

A Global Perspective

Edited by Benton E. Gup

Recent corporate scandals, together with the effects of globalization, have led to an increasing interest in corporate governance issues. Little attention has been paid, however, to international laws and recommendations dealing with corporate governance in banking from a global perspective. This impressive international set of expert contributors – academics, practitioners and regulators – remedies the lack of attention by examining the various issues and concerns of this important topic.

Chapter 11: Germany’s Three-pillar Banking System from a Corporate Governance Perspective

Horst Gischer, Peter Reichling and Mike Stiele

Subjects: business and management, corporate governance, economics and finance, corporate governance, financial economics and regulation, money and banking, law - academic, corporate law and governance, finance and banking law


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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