Stable financial markets are of great importance for the German economy, as companies and citizens need strong financial partners and comprehensive financial services. As a consequence of the financial crisis, policymakers have taken numerous regulatory measures that are ultimately designed to make financial markets more stable and banks more risk-resilient and thus to ensure the reliable provision of financial services. In contrast, the introduction of dual banking systems does not help to reduce risk.
With this in mind, the German business and banking sectors advocate maintaining the universal banking system in Germany and the EU. The universal banking system has evolved together with the German economy and its specific structure based around its strongly international orientation and its backbone of small and medium-sized enterprises. Particularly in Germany, the house bank principle and universal banking go hand in hand and are a key condition for a broad and differentiated range of customer- oriented financial products and services; it is by no means only classical banking products such as loans, deposits and payments that are in demand in the business sector. Hedging and financing tools, which are usually associated with investment banking, also form an integral part of financial services for companies, in particular for the many importers and exporters. This is especially true for the German ”Mittelstand”.
The introduction of a dual banking system would compromise this established financing tradition, which was maintained during the financial crisis, for example by increasing the cost of hedging corporate currency or interest-rate risks and restricting the supply of such financial services. Policymakers in Germany should therefore take a highly critical view of any idea which aims to introduce elements of a dual banking system, for example those outlined in the proposals made by the High-Level Expert Group chaired by Finnish central bank president Erkki Liikanen, and express support for retaining the well- established universal banking system in Germany. Intervening in banks’ business models does not strengthen financial market stability but instead serves to impair the functionality of the German banking sector. Whilst the benefits of such an initiative are unclear, the resulting burdens would become immediately visible – a loss of international competitiveness for companies in Germany and a resulting threat to jobs.
Read more: German business sector backs universal banking system — Association of German Banks
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