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Posted on April 19th, 2014, by

The structure of the modern German banking system has also been significantly influenced by the federal nature of state structure, as well as the division of the country into occupation zones after World War II, which originally created the many-level structure of the banking system management (Brunner 29). Alongside this, concentration of the banking sector (both purely financial and administrative) occurred in the subsequent development. Moreover, Germany is characterized by the functioning of probably the most powerful system of close supervision over savings and cooperative banks at both regional and federal governmental levels, which is making the banking system of Germany one of the most socially oriented in the world.

The undoubted success of Germany’s banking system surely attracts the attention of foreign colleagues. Thus, considering the experience of Germany, we may mark that following factors providing high levels of German banks’ reliability and effectiveness that may further be taken as a guideline for the international experience of managing effective banking industry: a) the deep penetration of German banks into the system of controlling the real sector of country’s economy; b) the successful combination of banks’ universalization trends with the presence of numerous specialized banking institutions focused on different customer groups (citizens, small and Mittelstand businesses, members of cooperatives, etc.), which provides a universally high and common for all banks level of banking services, along with the almost complete coverage of the potential market; c) the adjusted mechanism of supervision over the functioning of German banks, making them extensively socially (rather than commercially) oriented though often suffering from excessive detailization and due processing; and d) the effective system of external audit, coordinating its work with state regulators. We should also agree with the authors of the article under consideration that the further transformation in the EU economies and strengthening of Germany’s economic positions may turn into the adoption of German banking business models by other countries forced to develop industry specialization.

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