Banks and their Profits in the Light of German Experience

Abstract

Commission IV of the SUERF Colloquium in Helsing0r is dealing with the subject of “Banks Their Profits”. The discussion is to be based on the Report on the interest margins of banks the cost of intermediation prepared by Professor Revell for the OECD. In Professor Revell’s Report the Commission’s subject of “Banks Their Profits” is examined in great detail but this is rather at variance with the intentions of those who commissioned the Report. As a result of his findings Professor Revell is concerned as to whether in an inflationary environment in view of the increased risks the banks can generate sufficient profits to maintain an adequate capital base. The starting point of the Report was not concern about whether the banks were making sufficient profits to remain viable but on the contrary the observation that interest margins in the banking industry were widening i.e. that the cost of intermediation was increasing. The point of departure was the question of customer protection. If the question of bank profits was considered at all then only with a suspicion that they might be too high.