The Federal Republic of Germany: Keeping the State at Arm's Length

Andreas Busch

in Banking Regulation and Globalization

Published in print December 2008 | ISBN: 9780199218813
Published online January 2009 | e-ISBN: 9780191711763 | DOI:
The Federal Republic of Germany: Keeping the State at Arm's Length

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Most academic studies have come to the conclusion that compared with other countries, German banking policy has not had to confront any major problems. This chapter presents a case study which shows that the German finance and banking sectors have experienced moments of crisis which threatened existing patterns of regulation. It begins by examining the historical background of banking regulation as a policy field. The specific challenges which policymakers in the Federal Republic have had to face in recent decades are then described. Next, the case study moves on to take a look at the relevant actors involved in the banking policy network before examining a key political moment, — the Herstatt Bank crisis. It argues that in Germany, a consultative, often informal, policy style and a high degree of both self-regulation and institutional continuity have contributed to a successful policy outcome with no major bank failures since the 1974 Herstatt Bank case. This success, however, had its own costs as the administrative system was not forced to enhance state capacity in this area and thus found it difficult to project its interests on the European and international levels which both grew in importance.

Keywords: German banking industry; banking system; state regulation; banking regulation; Herstatt Bank

Chapter.  21096 words.  Illustrated.

Subjects: International Relations

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