The central banking system
Germany’s
central bank
, the
Deutsche Bundesbank
, is headquartered in
Frankfurt am Main
, which is the country’s main financial centre and also the base of the
European Central Bank
, the
EU’s
chief financial institution. Before the circulation of the
euro
, the common currency of the EU, in 2002, the Bundesbank issued the deutsche
mark
(the country’s former currency) and oversaw its circulation. As the EU’s most powerful national central bank, the Bundesbank played a pivotal role in the planning of and preparation for the
euro
. One of its primary roles now is to
implement
the
monetary
policies of the European System of Central Banks to help maintain the euro’s stability.
Country Facts
Audio File:
Anthem of Germany (
see article
)
- Officially:
- Federal Republic of Germany
- German:
- Deutschland or Bundesrepublik Deutschland
- Head Of Government:
- Chancellor:
Olaf Scholz
- Population:
- (2024 est.) 86,303,000
- Currency Exchange Rate:
- 1 USD equals 0.932 euro
Upon the establishment of the Bundesbank, its preeminent characteristic was its independence from government control, instituted to prevent a recurrence of the severe inflation experienced in 1922?23, when the government resorted to the
printing press
for finance. The federal bank maintained a policy of careful control of credit and concern for the international
exchange rate
of the deutsche mark, which had made
West Germany
the leading financial power in post-World War II
Europe
. The Bundesbank demonstrated its genuine independence in 1991 when it insisted that additional government
expenditure
for the eastern sector be covered by unwelcome tax increases rather than by borrowing. Individual
Land
(state) central banks are the Bundesbank’s representatives at state level.
The private banking sector
There are hundreds of commercial banks, of which the most important are the
Deutsche Bank
, the
KfW Bankengruppe, and the
Commerzbank
, though mergers have tended to shrink the number of major banks. Apart from conducting normal banking business, German banks provide financing for private businesses. As a result, the stock exchanges in Frankfurt,
Dusseldorf
, and other cities are less influential in providing finance for industry than parallel institutions in other countries.
Public and cooperative institutions
Germany has several types of public financial institutions, including credit and personal checking institutions and cooperative banks. Under public law, credit institutions operate as savings banks, and the state banks act as central banks and clearinghouses for the savings banks and focus on regional financing. The state-owned
Kreditanstalt fur Wiederaufbau (“Development Loan Corporation”) channels public aid to developing countries.
The cooperative banks are headed by the DZ Bank (
Deutsche Zentral-Genossenschaftsbank, or “German Central Cooperative Bank”), which serves as a central bank for some 1,500 industrial and agricultural
credit
cooperatives.There are also public and private mortgage banks,
installment credit
institutions, and the now-privatized postal check and postal savings systems, which were once operated by the federal postal service.
In
East Germany
the state bank was subordinate to the Ministry of Finance and designed to be a tool of central planning. It was part of a unified system that embraced not only central and local government but also banks, insurance companies, and industries, all of which were directed in their use of funds.
With economic union on July 1, 1990, East Germany came under the central banking system of the Deutsche Bundesbank, which effected the
conversion
of the eastern system to the West German mark. Progressively, the western German commercial banks, insurance companies, and all the other financial institutions moved in. The ruined East German economy, the unemployment assistance fund, and the bankrupt state and local administrations all required massive financial transfusions from the federal government and the West German states. In stages, consumer subsidies have been removed, while wages,
social insurance
payments, and taxes have been progressively raised toward western levels.