Germany: Protecting Bank Power

Abstract

Germany entered the turbulent decade of the 1970s in a rather different position than France because liberal principles were more entrenched in financial services policy. Capital controls had ended, interest rate controls had been lifted in the late 1960s, and, as we saw in Chapter 2, the key institutional groups — private commercial banks, savings banks, financial cooperatives — were entering into more intense competition with one another with each passing year. Overseeing this more liberal and competitive banking system was a more streamlined, centralised and rationalised supervisory apparatus. Regulatory principles for banking emphasised minimal state intrusion and encouraged self-regulation. Securities markets differed from banking markets; they were more decentralised, being anchored in eight regional stock exchanges that possessed, in turn, significant self-regulatory powers. State oversight of securities was remarkably light and exercised by officials employed by Land governments. Institutional arrangements in banking provided a policy repertoire that diverged less than other countries from the principles driving the changes in the international financial system. In contrast, the organization of securities markets and their oversight appeared increasingly anachronistic as globalization processes intensified.