The Financial and Economic Crises
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The Financial and Economic Crises

An International Perspective

Edited by Benton E. Gup

The 2007 financial and economic crisis that began in the United States and quickly spread around the world differed from earlier crises in a number of significant ways. This book examines the causes of these events in the US, and their impacts on North America, Europe, Asia and Australia.
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Chapter 4: The German Banking System and the Financial Crisis

Horst Gischer and Peter Reichling


Horst Gischer and Peter Reichling INTRODUCTION 1 Although the blazing fire of the international financial crisis seems to be extinguished, its causes are still being analyzed. The attention of economic and political circles is still focused on the issue of who is responsible for the crisis. However, being rich in mutual allegations of careless risk handling, this debate has not resulted in an appropriate mechanism which would help to avoid similar financial market shocks in the future. In contrast to the above-mentioned discussion, our contribution omits the question of responsibility. Instead, emphasis is placed on the consequences of the financial crisis for national and international markets. In the following, we attempt to contribute to the discussion about an appropriate and reasonable architecture of financial markets. For any debate of this kind, it is indispensable to consider the special features of national economies, which are known in the literature under the term ‘corporate governance’. This chapter focuses on the German banking system, which has been criticized as inefficient, non-productive and in need of consolidation.1 However, the German banking system turned out to be especially insusceptible to exogenous shocks, such as the current crises. Therefore, our attention is primarily concentrated in the institutional agents in the German financial market. A special focus is on the issue of the strategic direction of bank business models that concentrate on particular business areas and client segments. This differentiation is supplemented by a regional component, which is of fundamental importance for particular banking institutions in Germany....

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