European Banking System: In Germany, Little Appetite to Change Troubled Banking System

One of the most battered banking systems in Europe has a history of mismanagement, corruption and politically connected lending, and it has cost taxpayers hundreds of billions of euros.

Is it Italy, Spain or perhaps Greece? No. That description is of Germany’s banking sector.

While the country’s economy is often held up as a model, German banks are among Europe’s most troubled.

They required a bailout bigger than the one American banks received, and many are still struggling to recover.

But there is remarkably little discssion about fundamentally changing the structure of the German banking system. On the contrary, Europe’s economic leaders criticize Germany for slowing progress toward unifying the Continent’s patchwork system of bank regulation, an effort seen as crucial to restoring faith in the euro zone and averting future globe-threatening crises. Ailing German banks are also a dead weight on the euro zone economy as it struggles to crawl out of recession. 

“Germany was actually hit very hard by the financial crisis,” said Jörg Rocholl, president of the European School of Management and Technology, a business school in Berlin. But the debate about the future of banking in Germany is “alarmingly nonintense,” Mr. Rocholl said.

Banks in Germany invested in seemingly every bad asset that came their way, including American subprime assets and Greek bonds. “There is no sense of pride that Germans were especially thorough or prudent,” said Sven Giegold, a German who is a member of the Economic and Monetary Affairs Committee in the European Parliament. 

EU-Digest