The financial system

der finanzsystem

The German financial system is overseen and monitored by the European Central Bank (ECB).  Like the Federal Reserve System in America, the ECB sets interest rates, controls the money supply, and regulates banks and other financial institutions within the European Union. 

For Germany, the strength of the economy is a source of national pride.  Since Germany emerged from the ruins of World War II, the country has experienced enormous economic rebirth and growth, and the Deutsche Mark became something of a national icon.  As a result, January 1, 2002 was a somewhat controversial day in the country.  Some people applauded the introduction of the Euro as the new official currency and as an official reintroduction as an European leader, while some Germans regretted that one of the few sources of German pride was officially retired.  The mark became an icon through several accepted principles that ruled German business:  "inflation is evil; fiscal and monetary prudence is good; and a currency must be managed by a politically independent central bank" (Andrews).  Germany's independent central bank was the Bundesbank, and its success made it the model for the current ECB.

Other than the ECB, the other chief influences over the German financial system are the commercial banks and savings banks.  Banks provide most of the investment capital to German businesses, but unlike the United States, only about half of the banking industry is made up of commercial banks.  The rest are savings banks that are either locally or regionally owned and operate under public statutes.  Most Germans keep their accumulated wealth in banks, either commercial or savings, due to the high interest rates paid by these organizations.  By comparison, many Americans choose to hold wealth in the form of stocks and bonds.  As a result, non-bank financing is not centralized like it is in the United States.  Click here to learn more about the Stock Market in Germany.

The reliance of Germans on their banking system actually helped speed-up the reunification process.  The "big three" banks of Germany -- Deutsche Bank, Dresdner Bank, and Commerzbank -- all opened a significant number of branches in the East as soon as reunification occurred.  Their investments in the East and the educational programs they initiated helped to ensure the integration of the East Germans into the economic ways of the West.

Work Cited

Andrews, Edmund L.  "Germans Say Goodbye to the Mark, a Symbol of Strength and Unity."  New York Times.  1 January 2002.