US banking system compared to Germany banking system.

There are various similarities and differences that can be drawn through a comparison between the United States and German Banking systems. Each of these systems has strengths or weaknesses whose significance can vary at different points in the countries’ economic cycle. To begin with, Germany and United States have the biggest banking systems in terms of assets and banks among the economies that are characterized by free-markets. Both banking systems have different categories of banks like the saving and commercial banks (Kunt, 2004). They have realized a considerable growth in assets, even though the number of banking institutions has decreased mostly due to increased mergers and acquisition for the purpose of achieving economies of scale. In line with countries’ regulations and policies, the baking systems normally have plans for comprehensive insurance that are paid premiums so as t safeguard customer’s principal amount in deposits. Moreover, just like insurance and security powers have been permitted in Germany and in other European Union nations, they are also permitted in United States after the Gramm-Leach-Billey Act was passed in 1999 (Kunt, 2004)

The banking system in America largely includes the saving banks and commercial banks. However, there has been a decline in saving banks due to a quick loss in market share, with the biggest ones converting to commercial institutions. Majority of the deposits is held by the biggest banks even though most are the small banks. The system is under the regulation of agencies sponsored by the federal government. There is a unique aspect in the system, in the form of credit unions which are separate lending and depository institutions.  The Germany system is normally based on banks groups which include cooperatives, public and private sector banks. These systems serve distinct markets which have limited level of competition unlike in United States where competition dictates the market. Unlike in U.S regulatory agencies, Germany has a unified regulatory approach which seems quite superior Brunner, (Brunner, Decressin, Hardy & Kudela, 2004).

References

Brunner, A., Decressin, J., Hardy, D. C. L., & Kudela, B. (2004). Germany's three-pillar banking system: Cross-country perspectives in Europe. Washington, DC: International Monetary Fund.

Kunt, A. (2004).Financial Structure and Economic Growth: A Cross-country Comparison of Banks, Markets, and Development. MIT Press 81