Comparative Analysis of the English and the German Banking System with Special Regard to Bank-Industry Relations and their Implications on Companies‘ Performance

Diplomarbeit von Sara Lautenschläger

Abstract:

The essay is about the English and the German banking system, their characteristics and the implications of these.

As the English banking system is defined as a specialised banking system and the German one is known as a universal banking system, these terms are explained in the first chapter. Furthermore, the chapter deals with the history of both systems to make clear why these two banking systems developed into two different directions.

After having looked at the differences of the two alternative banking systems, their structure is analysed in more detail in the second chapter. All different kinds of banks existing in England and Germany are identified and their scope of functions and goals are described.

In the following some important features of the banking systems, such as short-termism and corporate governance, are analysed in great detail. This means that these features are defined and their causes and consequences are identified and evaluated.

After the different banking systems have been described with regard to their structure and features, the objective of the next chapter is, to point out the implications of these systems on companies’ performance. Therefore it is first of all necessary to define performance and the factors being responsible for a high or low economic performance. Afterwards, the influence of the banking systems on these factors are analysed.

The last chapter of this essay shortly describes other existing opinions concerning the structure of the banking systems and their implications on companies’ performance. Furthermore, the chapter points out some tendencies for the future development of these banking systems.

Table of Contents:

	LIST OF ABBREVIATIONS	I
	LIST OF FIGURES	II
	LIST OF TABLES	II
1.	INTRODUCTION	1
2.	PRESENTING THE TWO ALTERNATIVE FINANCIAL SYSTEMS	2
2.1	THE GERMAN FINANCIAL SYSTEM AND ITS HISTORY	2
2.2	THE BRITISH BANKING SYSTEM AND ITS HISTORY	3
3.	STRUCTURE OF THE BANKING SYSTEMS	3
3.1	GERMANY	3
3.1.1	General Information	4
3.1.2	Universal Banks	5
3.1.2.1	Private Commercial Banks	5
3.1.2.2	Savings Bank Sector	6
3.1.2.3	Cooperative Sector	7
3.1.3	Specialised Banks	8
3.2	UK	9
3.21.1	The Banking System in General	10
3.2.2	Authorised Banks	11
3.2.2.1	Retail Banking in the UK	11
3.2.2.2	Wholesale Banking	12
3.2.3	Listed Discount Market Institutions	14
3.2.4	Other Financial Institutions	14
4.	FEATURES OF THE BANKING SYSTEMS	15
4.1	PROVISION OF CAPITAL AND FUNDING FOR INDUSTRY	15
4.1.1	Funding Possibilities	15
4.1.2	Special Needs of Small and Medium-sized Companies	17
4.2	SHORT - TERMISM	18
4.2.1	How to Define Short-termism ?	18
4.2.2	Institutional Investors Requirements as the Major Cause for Short-termism	18
4.2.3	Consequences of Short-termism: R&D	19
4.2.4	Consequences of Short-termism: Take-over Activities	22
4.2.4.1	Take-over activities: Definition, Targets and Risks	22
4.2.4.2	Hostile Take-overs	23
4.3	CORPORATE GOVERNANCE	25
4.3.1	The English and the German System of Corporate Governance	25
4.3.2	Supervisory Boards	26
4.3.3	Shareholding	27
5.	PERFORMANCE OF COMPANIES	29
5.1	SELECTED FACTORS OF INFLUENCE ON ECONOMIC PERFORMANCE	29
5.1.1	The Macroeconomic Environment	30
5.1.2	Education and Training	31
5.1.3	The Company Management	32
5.1.4	Innovation	33
5.1.5	Funding Costs	33
5.2	EVALUATION OF THE COMPANIES' PERFORMANCE	34
6.	RÉSUMÉ	34
6.1	DIFFERING OPINIONS CONCERNING THE BANKING SYSTEMS	35
6.1.1	Five types of universal banks	35
6.1.2	Subordinate importance of banks in the German financial system	36
6.2	CURRENT TENDENCIES AND FUTURE PERSPECTIVES	37
6.3	CONCLUSION	37
	APPENDIX
	BIBLIOGRAPHY