“The prospects of the German Three Pillars system of private, public sector, and cooperative banks is a matter of ongoing debate. The need for a thorough reform of the Landesbanken (LB) is now widely accepted, although finding political consensus on a durable solution is elusive. However, the issues extend beyond the LB. The underlying issue is how Germany can maintain its relatively stable financial system, effective financial intermediation, and low costs to customers, while correcting some of the weaknesses, such as low profitability (including when adjusted for risk) and susceptibility to excessive political influence. This issue must be addressed in the context of prospective changes to the global financial landscape and regulatory changes following the global crisis.”
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