Private banking in Germany
Introduction
The study of the financial and banking system of any country is of the utmost importance to understand the behavior of its economy in general and know the actions and strategies taken by central financial institutions before a possible recession and a crisis.
The German banking system is an interesting case study since it is a particular structure by having different types of financial and credit entities that offer services for different segments;Something that is not common in most economies where power is exercised by a central bank followed by a minority of private banks.
The present monograph aims to present an overview of what the German financial system is and more specifically the situation of private banking in recent years and its evolution until today to understand why Germany, despite being one of thericher economies in the world, he has been presenting a danger of recession.
At a first point, the following brief presents an overview of the country with its demographic and economic data as well as a brief description of what the German economy is in general. Then there is a brief description of how the financial system in Germany is structured and the stratification of its banking system. Subsequently, the issue of the financial crisis that arose in the United States towards 2008 and the way it affected Germany is an important starting point for the crisis that currently currently lives.
Finally, the theme of the situation of private banking in recent years is addressed, making an evaluation of the entities that are part of it and how they are doing to cope with the situation and the strategies to follow to avoid a possible global financial crisis.
Developing
- General data
Germany, officially known as the Federal Republic of Germany is a European country located in Western Europe. Geographically, Germany borders the North with the North Sea, Denmark and the Baltic Sea;to the east with Poland and the Czech Republic;to the south with Austria;to the southwest with Switzerland;West with France, Luxembourg, Belgium and Northwest with Netherlands. It has a territorial extension of 357,386 km2 in which they live an approximate 83 million people.
The capital of Germany is Berlin, the most populous city in Western country and Europe, has 3.5 million inhabitants. The official language is German, however, there are 3 minority languages: Sórabo, Danish and Northern Frison. In Germany, Christianity can be considered as the majority religion, however, an official religion is not determined since there is a diversity of religions.
The official currency is the euro and the central bank is the German Federal Bank. Germany is distinguished by being the economic engine of the European Union and the third largest exporter worldwide. The main products that Germany exports are: vehicles, machinery, chemicals, electronic products, pharmaceutical products, transport equipment, basic metals, food products, rubber and plastic. It is said that Germany has become an industrial power since it sells more than you buy.
As for the form of government, Germany focuses its power on a federal government, which is the Executive Power of the Republic;It is also called Federal Cabinet and is made up of federal chancellor and federal ministers.
- German economy
Germany is the fourth economic power worldwide and the first in Europe. In 2018, according to data from the Federal Statistics Office, GDP grew by 1.5%, the lowest index in the country in five years;Although the IMF argues that the growth was 1.9%. The growth was due to the increase in domestic demand and export revenues, however it was affected by the decrease in the sale of vehicles and a weak world economy. As can be seen in the graph no. 1, it is estimated that growth rates for 2019 and 2020 are 1.9% and 1.6% respectively, according to the IMF.
In 2018, the German economy presented a 1% surplus due mostly to a lower public spending, this situation has been observed in the same way for five years, which has also generated a contraction of public debt. Towards the third quarter of 2018 it was observed that the economy suffered a contraction;This is due to the fact that lower income was received in the export area derived from commercial tensions between the United States and China. It has also affected the concern that remains in the face of the uncertainty generated by Brexit and a slowdown in the development of the automotive industry.
In the case of inflation, Germany has maintained its relatively stable levels since in 2018 an index of 3 was observed.5% which is expected to decrease to 3.4% at the end of 2019 and a 3 3.3% for 2020. Germany has been among one of the richest countries in the world, proof of this is that it has a 50 -cap of 50.639 USD;However, it is not a nation that is free of the threat of poverty since about 19% of the German population is exposed to poverty or social exclusion.
If there is talk of the productive sectors that develops in a better way in the German economy, it can be found that, it is mainly 3 sectors that lead production;They are: agricultural, industry and services. In the case of the agricultural sector, it can be said that it is the least participation since it represents only 0.6% of GDP. The main agricultural products that are marketed are: dairy, sugar beet, wheat, barley and cereals.
Then in the amount of market share is the industrial sector that represents 27% of GDP and employs about 27% of the German workforce. It can be said that Germany is the most industrialized country in Europe, mainly because it has a fairly strong industry than automotive, which leads the market. In less participation but of great importance there are also industries such as mechanical engineering, electrical and electronic equipment and chemicals.
However, the sector that represents the productivity of Germany is the services sector since it represents 61% of the national GDP and uses the largest amount of the country’s workforce. The rise of this sector has been mainly due to the increase in the demand for business related services, in the same way the force it has taken, not only in Germany but throughout the world, the development of new technologies has contributed.
- German financial system
The financial and banking system in Germany is mainly composed of four financial figures that are responsible for regulating the economy. Among these can be found: public banks, private banks, savings banks and cooperatives.
The system currently counts Don 1,583 credit entities. There are 875 credit cooperatives and 386 savings banks. In the system there are also 6 regional public banks called Bandanken;These act as a compensation chamber of the State Savings Banks, in addition to functioning as the Public Bank of the region where they are located.
The Banking System Authority is exercised by Deutsche Bundesbank, 11 regional banks that supervise the payment mechanisms and execute monetary policy in their respective jurisdictions depend on this. The bank inspection corresponds to the Federal Office for the Supervision of Financial Services (BAFIN) under the Ministry of Finance.
According to ICEX (2019), there are two traditional private banks the Deutsche Bank and Commerzbank, both located in Frankfurt. These represent approximately 35% of all universal private banking. The Deutsche Bank acquired the postbank and Commerzbank acquired the Dresdner Bank bank, however the current bad situation of the two banks have led to wanting to sell them again without success for not finding a buyer. There is a third bank, the Hypovereinsbank that belongs to the Italian Unicredito firm.
In the group of public banks, the export credit society and the credit entity for reconstruction can be highlighted;The latter is the main instrument of the country’s economic promotion policy in internal development programs, preferred export credits and development aid.
With the exception of Unicredito, the importance of foreign banking is relatively small since it has 142 entities that are equivalent to less than 15% of the total assets of the system.
Frankfurt is the most important financial square in Germany and the second most important in Europe. Through the Xetra electronic system more than 90% of all variable income transactions in Germany circulates.
- Financial crisis in Germany
For the Professor of Applied Economics of the University of Seville, Torres defines a financial crisis as a more or less sudden disturbance that produces a considerable loss of value in financial institutions or assets that have decisive influence on the march of business and activitygeneral financial and economic and that causes a fundamental imbalance between the demand for financing means made by economic subjects and the offer made by financial entities or intermediaries.
This unexpected and inevitable event is associated with uncertainty in the banking system of any country causing problems in the financing of the general economy.
This type of situation originates in the financial sector, and affecting the economy, when this happens the effects are notorious and obviously directly affect financial.
- World financial crisis
One of the greatest economic crises of recent years began in 21008 in the United States extending to the rest of the world, being quite serious causing the bankruptcy of great and important banks, as can be mentionedand that results in the beginning of the global financial crisis.
conclusion
The crisis occurred in the United States in year 2.008 was a constituent and financial catastrophic event that changed the lives of many people. The country had not finished recovering completely from the consequences of the attack on the twin towers of September 11, 2,001;This event strongly hit the confidence for the economy and was the greatest attack on the history system. Given the magnitude of what happened, the Federal Reserve used the monetary policy manual to avoid greater catastrophe and reduce interest rates and inject money in a massive way into the economy through the different monetary expansion mechanisms.
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