SpringerLink
Log in

Methods for alleviating the problem of Too big to fail in Germany

  • Original Article
  • Published:
Journal of Banking Regulation Aims and scope Submit manuscript

Abstract

As a result of the last financial crisis, the problem of Too big to fail (TBTF) escalated in many countries, among which in Germany. The complexity and volume of the investment activity run by many banks caused liquidity problems which threaten their further operations. Therefore, in order to stabilize the financial market, the countries were forced to dedicate significant public resources to save the banks threatened with failure. Animated discussion on the TBTF banks made it necessary to seek regulatory solutions which would reduce the scale of TBTF problem. These solutions should be based on higher capital requirements, recovery and resolution of credit institutions, regulating derivatives and hedge funds as well as structural reforms of the banking sector in the spirit of the Glass–Steagall Act. The aim of this article is to present the structural reforms implemented in Germany under the so-called Trennbankengesetz and the assessment of their impact on reducing the scale of TBTF problem in Germany. The authors propose a research hypothesis stating that the structural reforms of banking sector implemented in Germany are too liberal to definitively solve the TBTF problem. That is why in the last part of this article, the authors have formulated their own proposals to reform the banking system in the spirit of Glass–Steagall Act, taking into consideration the universal model, typical of the German banking sector.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Subscribe and save

Springer+ Basic
EUR 32.99 /Month
  • Get 10 units per month
  • Download Article/Chapter or Ebook
  • 1 Unit = 1 Article or 1 Chapter
  • Cancel anytime
Subscribe now

Buy Now

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1

Source: Own study prepared on the basis of Sanierungs- und Abwicklungsgesetz

Similar content being viewed by others

References

  1. Bancarewicz, G. 2005. Kryteria klasyfikacji i uprzywilejowana pozycja banków ważnych systemowo oraz wyrównywanie szans banków w systemie finansowym, Bank i Kredyt, listopad-grudzień.

  2. Weitzel, J. 2014. Die ökonomische Bedeutung des Bankensektors unter Berücksichtigung der „Too-Big-to-Fail“-Doktrin. Göttingen: Cuvillier Verlag.

    Google Scholar 

  3. Carrington, T. 1984. U.S. won’t let 11 biggest banks in nation fail. Wall Street Journal 20: A2.

    Google Scholar 

  4. Barth J. R., and A. Prabha. 2013. Resolving too-big-to-fail banks in the United States, Working Paper Mercatus Center George Mason University, No. 13-05.

  5. Stern, G.H., and R.J. Feldman. 2009. Too Big to Fail: The Hazards of Bank Bailouts, 2nd ed. Washington: Brookings Institution Press.

    Google Scholar 

  6. Barth J. R., and C. Wihlborg. 2016. Too Big to Fail and Too Big to Save: Dilemmas for Banking Reform, National Institute Economic Review No. 235.

  7. Kellermann, K. 2010. Too Big to Fail: Ein gordischer Knoten für die Finanzmarktaufsicht?. Vaduz: Konjunkturforschungsstelle Liechtenstein.

    Google Scholar 

  8. Pflock T. M. 2014. Europäische Bankenregulierung und das “Too big to fail-Dilemma”, BMV, Berliner Wiss.-Verl. NWV, Neuer Wiss. Vel., Berlin, Wien.

  9. Blum, U. 2012. Pro Trennbankensystem–Transparente Systemik, Leitartikel, Wirtschaftsdienst, 92. Jahrgang, Heft 1.

  10. Pop, A., and D. Pop. 2009. Requiem for market discipline and the specter of TBTF in Japanese banking. The Quarterly Review of Economics and Finance 49: 1429–1459.

    Article  Google Scholar 

  11. Todd W. F., and J. B. Thomson. 1990. An Insider’s View of the Political Economy of the Too Big to Fail Doctrine, Working Paper No. 9017, Federal Reserve Bank of Cleveland, Cleveland.

  12. Mishkin F. S. 2006. How Big a Problem is Too Big to Fail? A Review of Gary Stern and Ron Feldman’s Too Big to Fail: The Hazard of Bank Bailouts, Journal of Economic Literature, 44, Nr. 4.

  13. Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC (Official Journal Nr L 176 z 27 VI 2013 r.).

  14. Kruszka, M., and M. Mokrogulski . 2017. Wymogi kapitałowe dla europejskich banków o znaczeniu systemowym, Kwartalnik Naukowy Uczelni Vistula 1(51), Warszawa.

  15. Weistroffer, C. 2011. Identifying systemically important financial institutions (SIFIs), Deutsche Bank Research.

  16. Gropp, R., J. Vesala, and G. Vulpes. 2006. Equity and Debt Market Signals as Indicators of Bank Fragility. Journal of Money, Credit and Banking 38: 399–428.

    Article  Google Scholar 

  17. Demirgüς-Kunt, A., and E. Detragiache. 2002. Does deposit insurance increase banking system stability? An empirical investigation. Journal of Monetary Economics 49: 1373–1406.

    Article  Google Scholar 

  18. Hett F., and A. Schmidt. 2012. Do Bank Bailouts hurt Market Discipline? Evidence from recent Financial Crisis, Working Paper, 03-2012, University of Frankfurt.

  19. Koleśnik, J. 2019. Bankowe ryzyko systemowe – źródła i instrumenty redukcji. Warszawa: Difin.

    Google Scholar 

  20. Gesetz über das Kreditwesen (Kreditwesengesetz- KWG), vom 10. Juli 1961, Bundesgesetzblatt Teil I, Nr 49, Bonn, den 15. Juli 1961.

  21. Directive 2013/36/EU of the European Parliament and of the Council of 26 June 2013 on access to the activity of credit institutions and the prudential supervision of credit institutions and investment firms, amending Directive 2002/87/EC and repealing Directives 2006/48/EC and 2006/49/EC.

  22. Koleśnik, J. 2017. Globalne banki a ryzyko systemowe w Unii Europejskiej-narzędzia ograniczania, Annales Universitatis Mariae Curie-Skłodowska, Sectio H Oeconomia 2017, nr 6, Vol. 51, 2017. https://doi.org/10.17951/h.2017.51.6.141.

  23. Koleśnik, J. 2017. Podział banków jako skuteczna metoda redukcji ryzyka too big to fail, Ekonomia i Zarządzanie 2014, nr 3, tom 6. https://doi.org/10.12846/j.em.2014.03.05.

  24. Stiglitz, J. E., Too Big to Fail or Too Big to Save? Examining the Systemic Threats of Large Financial Institutions, April 21, 2009, https://www.jec.senate.gov/public/_cache/files/6b50b609-89fa-4ddf-a799-2963b31d6f86/stiglitz-jec-april21.pdf. Accessed 17 August 2017.

  25. Zaleska, M. 2015. Zintegrowane ramy finansowe– koncepcja i wyzwania, w: Europejska Unia Bankowa, red. Warszawa: Zaleska M., Difin.

    Google Scholar 

  26. Szczepańska, O., A. Dobrzańska, and B. Zdanowicz. 2015. Resolution czyli nowe podejście do banków zagrożonych upadłością. Warszawa: Departament Stabilności Finansowej, NBP.

    Google Scholar 

  27. Hüther, M. 2013. Re-Regulierung des Bankensystems- Stand und Perspektiven. www.iwkoeln.de/de/presse/gastbeitraege/beitrag/michael-huether-in-derzeitschrift-kreditwesen-re-regulierung-des-bankensystems-stand-und-perspektiven-103695. Accessed 27 July 2017.

  28. Dodd-Frank Wall Street Reform and Consumer protection Act, Public Law 111-203-July 21.2010, 124 Stat.1376.

  29. Independent Commission on Banking, ICB: Final Report–Recommendations, 2011, s. 59, http://bankingcommission.independent.gov.uk.

  30. Liikanen, E. 2012. Final Report. High-Level Expert Group on Reforming the Structure of the EU Banking Sector, Brussels.

  31. Proposal for a Regulation of The European Parliament and of the Council on Structural Measures Improving the Resilience of EU Credit Institutions, 2014, European Commission, COM (2014) 43 Final, Brussels.

  32. Stawarczyk, F. 2014. Rozdzielenie banków–koncepcje zmian w Stanach Zjednoczonych Ameryki, w Wielkiej Brytanii i w Niemczech, Zarządzanie i Finanse Journal of Management and Finance Vol. 12, No. 3/2/2014, Zakład Poligrafii Uniwersytetu Gdańskiego, Sopot.

  33. Bank of England. 2016. The Implementation of Ring-Fencing: Prudential Requirements, Intragroup Arrangements and Use of Financial Market Infrastructures, Policy Statement|PS20/16.

  34. Loi 2013-672 du 26 Juillet 2013 de separation et regulation des activités bancaires, NOR: EFIX1239994L, JORF n-173 du 23 juillet 2013.

  35. Gesetz zur Abschirmung von Risiken und zur Planung der Sanierung und Abwicklung von Kreditinstituten und Finanzgruppen vom. 2013. Bundesgesetzblatt Jahrgang 2013, Teil I, Nr 47, ausgegeben zu Bonn, am 12.

  36. Dąbkowska, A. 2016. Wpływ raportu Liikanena na zmiany w regulacjach sektora bankowego w Niemczech, Prace Naukowe Uniwersytetu Ekonomicznego we Wrocławiu, Wydawnictwo Uniwersytetu Ekonomicznego we Wrocławiu, Zeszyt 436, Wrocław.

  37. Mindestanforderungen an das Risikomanagement (BA) this BaFin regulation concerning risk management was originally published on 20 December 2005, amended on 14 December 2012 in accordance with Basel III guidelines. It became effective on 1 January 2013.

  38. Dombert, A., T. Liebig, and I. Stein. 2014. Trennbankensystem–ein Weg zu mehr Finanzstabilität in Deutschland?. Perspektiven der Wirtschaftspolitik 15(1): 41–55.

    Article  Google Scholar 

  39. Hackethal, A., J. Krahnen. 2013. Kommentierung des Entwurf eines Gesetzes zur Abschirmung von Risiken und zur Planung der Sanierung und Abwicklung von Kreditinstituten und Finanzgruppen, Center of Excellence safe substantiable Architiecture for Finance in Europe, Frankfurt. http://safe-frankfurt.de/uploads/media/Kommentierung_Gesetzentwurf_6Februar2013.pdf. Accessed 6 January 2016.

  40. Hackethal, A., and J. Krahnen. 2013. Kommentierung des Entwurf eines Gesetzes zur Abschirmung von Risiken und zur Planung de, r Sanierung und Abwicklung von Kreditinstituten und Finanzgruppen, Center of Excellence safe substantiable Architiecture for Finance in Europe, Frankfurt. http://safe-frankfurt.de/uploads/media/Kommentierung_Gesetzentwurf_6Februar2013.pdf. Accessed 6 January 2016.

  41. Hickel, R. 2013. Schriftliche Stellungnahme zur öffentlichen Anhörung des Finanzausschusses des Deutschen Bundestages am 22.4.2013 in Berlin zum Gesetzentwurf der Bundesregierung: “Entwurf eines Gesetzes zur Abschirmung von Risiken und zur Planung der Sanierung und Abwicklung von Kreditinstituten und Finanzgruppen”(Das. 17/12601).

  42. Huber, J. 2013. Stellungnahme zum Trennbankengesetz-Entwurf vom 6 Feb 2013 Gesetz zur Abschirmung von Risiken und zur Planung der Sanierung und Abwicklung von Kreditinstituten und Finanzgruppen, 16 April 2013, access as of http://www.iicpa.com. Accessed 21 October 2017.

Download references

Author information

Authors and Affiliations

  1. Institute of Banking, Collegium of Socio-Economics, Warsaw School of Economics, al. Niepodległości 162, 02-554, Warsaw, Poland

    Jan Koleśnik

  2. Department of Social Sciences, Institute of Economics and Management, John Paul II Catholic University of Lublin, al. Racławickie 14, 20-950, Lublin, Poland

    Anna Dąbkowska

Authors
  1. Jan Koleśnik
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Anna Dąbkowska
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding authors

Correspondence to Jan Koleśnik or Anna Dąbkowska.

Additional information

Publisher's Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Koleśnik, J., Dąbkowska, A. Methods for alleviating the problem of Too big to fail in Germany. J Bank Regul 22, 11–23 (2021). https://doi.org/10.1057/s41261-020-00125-1

Download citation

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1057/s41261-020-00125-1

Keywords

Search

Navigation