Kiel Working Papers, Kiel Institute for World Economics
No 960:
Foreign Competition and Disintermediation: No Threat to the German Banking System?
Claudia M. Buch and Stefan M. Golder
Abstract: The German financial system is characterized by lower
degrees of penetration by foreign commercial banks and of (bank)
disintermedation than, for instance, that of the United States. These
differences could be attributed to the fact that universal banking in
Germany creates implicit barriers to entry. Yet, regulatory and
informational differences which are unrelated to universal banking could be
responsible for the observed difference as well. This paper provides a
stylized theoretical model of the banking industry, which suggests that
market segmentation and limited market entry can be due to a number of
factors, including information costs. Preliminary empirical evidence does
not provide clear evidence for the hypothesis that universal banking is the
reason for the observed differences in financial systems.
Keywords: Competition in banking, universal banking, information costs, Germany, United States; (follow links to similar papers)
JEL-Codes: G21; G14; (follow links to similar papers)
40 pages, December 1999
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