751-Sabar Institute Of Management, Tajpur - Gujarat Technological ...

Overview
The development of the German banking industry is closely related to Germany’s history and its
evolving industry. The development of the banking sector was a respond to the industrialization
and the accompanying financial needs. Until 1870 the banking sector was dominated by private
bankers and influential “banking families”. Some of them are still known today, such as Sal.
Oppenheim jr. & Cie. The privet bankers were financed only by equity capital. However as the
industrialization went on and the need for money and financing constantly grew, this solely
equity was not sufficient anymore to finance the occurring capital intensive industries.
The aim of the cooperated bank was to focus on financing the industry.
In the second half of the 19th century and in the beginning of the 20th century, the German
banking industry was growing very fast and successful. This growth however was accompanied
with a steady concentration process and primarily the private banking houses were diminishing.
After the Second World War in 1947/48 those concentrated big banking houses were broken
down and 30 successor institutes were founded in West Germany. Later in 1952 those institutes
were again merged to three bigger institutes and in 1957 renamed to Deutsche Bank, Dresdner
Bank and Commerzbank. Those three banks still form part of the commercial sector of
Germany’s banking system. The German economy is a bank economy, with the main role in
finance and credit being played by commercial and savings banks while other forms of credit are
secondary. Banks provide most of the country's investment capital because of the high German
savings rate and because most Germans prefer to put those savings into banks rather than into
stocks or bonds. As with many other German economic phenomena, this bank role is not new.
Banks have played a central role in German financial and economic history since the middle
Ages.
The role of the banks in the economy has raised questions. Some political figures, including FDP
leader Otto Lambsdorff, have charged that the banks have accumulated excessive power.
Newspapers and magazines, including business journals, periodically make the same charge. But
there are no indications that the system is changing or will change in response to those criticisms.
One could even argue that it is more pervasive than ever, as banks now also play roles in
managing former East German firms that were privatized with western bank funds.
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