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

exist in the private and public sector, such as development banks, the Industriekreditbank and the
publicly-owned Kreditanstalt für Wiederaufbau (KfW), which together account for around 11%
of business volume.
This three-pillar system has changed little over time as most mergers occur within each pillar.
While private-sector banks in general do not have the opportunity to take stakes in public-sector
banks, there are no restrictions for public-sector banks to take over private banks. Takeovers of
credit co-operative banks are made difficult due to the regulation that each member has one
voting right.
Banking regulation and supervision
Centralize supervision at the Bundesbank as planned but ensure that this leaves the
institution with sufficient independence from the Ministry of Finance. Strengthen the
macro-prudential elements of supervision.
Widen the scope for supervision beyond compliance with quantitative requirements.
Prevent regulatory arbitrage by continuing to move closer towards a more principle-based
regulation. Supervisors should address more clearly than in the past the risks that certain
business strategies entail.
Consider introducing dynamic provisioning as well as a binding overall leverage ratio.
Introduce a framework for restructuring and winding-up framework systemically-relevant
banks that allows for a sufficiently early intervention by the government.
Current Situation of German Banking
Although a little less popular than German banks, foreign banks such as JP Morgan, Goldman
Sachs, and Merrill Lynch have also enjoyed success on German soil in recent years. Chances are
that their participation in the banking sector will continue to grow with time.
In the last century, the German banking industry has been a relatively secure and lucrative part of
the economy, offering much-needed stability for the country’s post-WWII rebuilding and
development. The current state of German banks, however, marked by the last year’s financial
crisis, is not a pretty picture. So, while it is true that no German bank has gone into bankruptcy
so far, it is also true that most of them have declared significantly lower profits for the last year.
The state’s intervention, aiming to fight off the crisis, has done little for the improvement of
German banking. Actually at present, the German government is the object of severe accusations
for having provided financial assistance “too little, too late” (it was not before the last April that
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