The three-pillar system in the German banking sector is a historical development and it is facing major changes. The banks incorporated under public law have so far been granted special guarantees but from mid-2005 these will change. In a report commissioned by the Federal Ministry of Finance DIW Berlin states that the unification of the “rules of the game” in the German financial sector that has now been tackled will involve heavier costs for the savings banks and state banks.
The report shows that parts of the public banking sector are working at a profit, and can be expected to maintain their position well under the new conditions, too. However, the pressure to achieve greater efficiency will continue to grow throughout the banking sector, all the more as by European comparison the German banking sector can be said to lag behind in consolidation and reorganisation. In the past the German banking system has proved extraordinarily stable, and against that background much suggests that the coming challenges will also be mastered. The report indicates a large number of possible solutions to these.