Tag: Germany

Federal Republic of Germany Financial Organization

Federal Republic of Germany Financial Organization

The past decade has seen substantial changes in German financial structures. Immediately after the 1948 monetary reform (see below: History) various special bodies (in part already operating under the Third Reich) were established, with the allied consent, which the state then used to provide financial assistance to the steel and coal industries, construction activities, shipbuilding, agriculture, etc. In November 1948, the Kreditanstalt für Wiederaufbau was created, with capital from American aid and funds granted by the central bank, in order to grant medium and long-term loans to economic enterprises in general. At the beginning of 1949 a similar institution was created: the Industriekreditbank, with activity limited only to industrial companies. In the following year two other institutions began to operate: the Landwirtschaftliche Rentenbank for credit to agricultural activities and related industries; the Deutsche Genossenschaftskasse for the Cooperation Credit. In the first months of 1952, the financing of exports was entrusted to a new entity: Ausfuhrkredit AG, operating with funds drawn mainly from the central bank.

Through the Allied Banking Commission, the occupation authorities retained some supervisory and regulatory power over Bank Deutscher Länder until the spring of 1952, by which time the Commission was dissolved. With 1 August 1957, the central banking system, which included the Bank Deutscher Länder and the central banks of the nine federal districts (Länder) plus that of Berlin, was centralized in a single institution: the Deutsche Bundesbank. The original capital of the Deutsche Bundesbank was fixed at DM 290 million and transferred into ownership to the federal government. The independence of the Bundesbank from state directives is expressly established in art. 12 of the institutive law. However, it is obliged to “support the general economic policy of the government”,

On a functional level, the new provisions have legally sanctioned and clarified without the possibility of further evasion the practice previously followed by public authorities to deposit their cash reserves with the central bank, leaving, however, the latter the faculty to allow the funds to otherwise they are invested rather than deposited. Furthermore, the financial relations with the state and public administrations have been regulated by establishing the total amount of credits that the Bundesbank can allow them. Finally, the operational possibilities of the new central institution have been widened in correspondence with an expansion of the financial maneuver that it can carry out: through the purchase and sale of all kinds of public securities (short and long-term,

With the centralization of the central bank, the central banks that previously operated in the various Länder have ceased to have a separate legal personality and are now the headquarters of the new central body. However, they have partly retained their autonomy (for certain transactions with public bodies and banks in their respective regions) and have their own board of directors (Vorstände). At the center, monetary and credit policy directives are entrusted to the Zentralbankrat (made up of the various head office directors and members of the central administration), while their execution is reserved to the Direktorium, without prejudice to the competences of the regional councils.

Currently, the German banking system includes over 13,000 units of all kinds, including commercial banks (351), savings banks (857), building credit institutions (47), agricultural credit (10,784), industrial credit (757). In the credit sector, the three large commercial banks (Deutsche Bank, Dresdner Bank and Commerzbank) occupy a prominent position, which together have a volume of outstanding loans greater than half of the total. Immediately after the war, the aforementioned banks were split into 30 distinct institutions. In 1952 these were again grouped into nine units. The integration process was carried out in 1958 through the concentration in Commerzbank of the banking institutions that were originally part of the group,

On the occasion of the general devaluation of the currencies, which took place in September 1949 following the adjustment of the sterling exchange rate, the German mark was also devalued, moreover to a lesser extent than that of the majority of the other countries (by 20.6%, compared to 30, 5). From then on, the official parity of the mark remained unchanged at DM 4.20 to one US dollar. Since December 1958 the exchange has been free to float within the limits of 0.75% around the parity level. After the declaration of convertibility by various OEEC countries in December 1958, Germany almost completely abolished the currency restrictions in force. On January 12, 1959, the German mark, like the US dollar, the Canadian dollar and the Swiss franc, was declared fully convertible.

German Democratic Republic. – In October 1951 the Deutsche Notenbank, created in July 1948, was declared the State Bank of the German Democratic Republic. Its powers “to actively support economic planning with the means of monetary and credit policy” are particularly extensive. The Deutsche Notenbank has (since January 1952) the functions of general organ of control of the entire economic process (of production, of the movement of business and of the observance of economic plans). It also collects and pays the turnover of all nationalized companies. In the context of the economic plans established by the special planning commission, it represents, alongside the Deutsche Bauerbank and the savings banks.

Federal Republic of Germany Financial Organization