German Commercial Banks

The banking sector in Germany comprises of approximately 2 400 separate banks with more than 45 000 branches throughout the country and over 700 000 employees. Some of these banks, about 400 in number, are really small – their balance sheets do not exceed € 100 million per year. But others, the major players in this economic sphere, are large corporations with vast networks of offices both, at home and abroad, which turn over billions of euro each year.

With regards to their activities, German banks are divided into two large groups – universal and specialized banks. Specialized banks, as their name suggests, provide only a limited number of specific services and offer their financial help mainly to businesses. Specialized banks are, for example, mortgage banks, building societies, capital investment banks, and special purpose banks. The most distinguished representatives of this type of banks are Deutsche Ausgleichsbank, DWS Investment GmbH, and Landwirtschaftliche Rentenbank.

Universal banks are by far the more common type, responsible for about 75 % of all transactions carried out in the banking sector. The offered financial services are greater in number and more varied than those of the specialized banks. Universal banks fall into one of the three main categories:

1. Private commercial banks, which offer standard banking services such as the provision of checking and savings accounts, processing of payments, lending of money to clients, underwriting of bonds etc. Some of the most popular commercial banks are Deutsche Bank, Commerzbank AG (the two largest banks in Germany), Dresdner Bank, Landesbank Berlin Holding AG and Postbank;

2. Sparkassen, i.e. savings banks, whose main object of business is the maintenance of savings accounts. Deposits in savings banks are protected by several deposit insurance funds, which have been agreed upon by the German Financial Group of Savings Banks;

3. Credit cooperatives are associations, established to promote the economic advancement of their members through the execution of joint business activities. Prominent representatives of this category of banks are DZ BANK AG and WGZ-Bank.

A category of its own is Deutsche Bundesbank: the German Federal Bank (which should not be confused with the privately owned Deutsche Bank). Being Germany’s central bank, Deutsche Bundesbank is responsible for the issue of banknotes, the management of currency reserves, and the supervision of commercial banks, acting as a clearing house for them. The structure is a part of the European System of Central Banks and, due to its stability, is the System’s most important member.

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 a German bank, Hypo Real Estate, had financial injections administered by the Bundestag for the first time). All this has forced banks to tighten up their lending procedures with regard to both, private individuals and legal entities, which, in turn, has led to the present stifling of Germany’s industries.

Nowadays, experts are reluctant to make exact predictions about the future of the German economy but one aspect seems certain – Germany’s banking sector is facing a hard and slow road to recovery.