Reference : A Peculiar Kind of Devastation: German Market-Based Banking
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A Peculiar Kind of Devastation: German Market-Based Banking
Howarth, David mailto [University of Luxembourg > Faculty of Language and Literature, Humanities, Arts and Education (FLSHASE) > Identités, Politiques, Sociétés, Espaces (IPSE) >]
Hardie, Iain []
Market-Based Banking and the International Financial Crisis
Howarth, David mailto
Hardie, Iain
Oxford University Press
[en] Germany ; Banking Systems ; Banking ; Coordinated Market Economy ; Landesbanks
[en] This chapter describes the shift of the German banking industry from the traditional bank-based financial capitalism to ‘market-based banking’, which took place from the late 1990s. German banks have long had high levels of market-based liabilities, but their borrowing has been from more stable wholesale markets, including via covered bonds. However, the rapid rise of market-based banking on the asset side of the balance sheet for German commercial and public sector banks, eager to expand in the context of cloistered national markets, explains the very high exposure of the German banking/financial system to the early stages of the financial crisis. German banks imported instability from the United States through the large-scale purchase of securitized loans. As a result, the German banking system was among the worst affected early in the international financial crisis yet the impact on total bank lending was limited.
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