By G. Robins
This ebook examines even if transplanting banks from open air can remedy the issues fascinated with making a well-functioning marketplace economic climate, having a look specially on the digital entire takeover of East German banks by way of their Western opposite numbers after unification. Drawing on quite a lot of English and German assets, and fieldwork interviews throughout Germany, it argues that there are not any speedy repair strategies for the transition to a industry. Implications are mentioned for East Germany and for different formerly centrally deliberate economies, and for the worldwide implications of international possession in banking.
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Additional resources for Banking in Transition: East Germany after Unification
In addition, lending to the government redirected resources from the private sector and contributed to the high real interest rates for loans. The large borrowing requirements of the government stemmed from high spending – large levels of social spending required in the transition – and shortfalls in revenue due to underdeveloped tax systems and also tax evasion. 35 In addition to being limited in quantities, the finance that was offered was predominantly of a short-term nature,36 and also often expensive.
132 Their analysis is based on existing patterns of corporate finance in market economies and the view that insider systems provide closer ties between banks and industry, as well as greater long-term industrial finance.
57 By owning these banks, enterprises could use them to attract low-cost funds provided by the central bank, and also exploit the banks’ limited liability. 58 An oligopolistic structure emerged after the partition of the monobank with the SOBs being dominant in their particular areas, such as trade, savings, industrial, or regional finance. The concentration in the banking system created inefficiencies between the sources and uses of funds, with the savings banks continuing to hold the majority of household savings but with underdeveloped interbank markets which 20 Banking in Transition would have allowed these funds to be efficiently made available to banks prepared to lend them.