The author explores what leads public banks to disregard their public service function and how one can prevent this disregard. Taking the German public banks as an example, he briefly describes their ‘mission creep’ in the form of financialization. Guided by the theory of hegemonic discourse, he interprets mission drift as part of neoliberal hegemony. This leads him to be skeptical about technocratic organizational solutions to the problem. From his discourse and analytical point of view, awareness about the public mandate seems to be of utmost importance. If the key actors of public banks are not aware of the public mandate and do not identify with the public mandate, then staying within the public mandate cannot be expected. Therefore, he argues that one needs to start with the general debate about the content of the public mandate and how public banks can contribute to it.
A Comparative Perspective
Edited by Christoph Scherrer
Xeniya Polikhronidi and Christoph Scherrer
The authors analyze the impact of governance structures on the performance of public banks by comparing an ambitious but ultimately failing Landesbank (WestLB) with a more prudent and so-far successful Landesbank (Helaba). By applying a multi-theoretical perspective, they find that the governance of these banks differed remarkably in terms of processes, which may explain the different fate of these Landesbanken to a large extent. While both banks suffered a major crisis in the 1970s, the owners of Helaba learned their lesson and set up a governance structure characterized by strict control and monitoring mechanisms. They also upheld the commitment to a public mandate. At WestLB, this commitment was dropped and the governance structure left management with a very high degree of autonomy.