Commentary: Banking lessons from Germany

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The Independent Online
German banking is famous for its close links with industry, an important ingredient in economic success. Indeed, the German system has been described as bank-based capitalism, and there have been many suggestions as to how British banks can learn from it.

But according to Hilmar Kopper, the head of Deutsche Bank, the notion that German banks have some special power in the economy is nothing but a 'well- cultivated legend'. In a lecture at King's College, London, he talked down the importance of banks like Deutsche, which he said had a market share in Germany of only 6 per cent, 'an amazingly small figure for the biggest bank'.

Of course, it is relationships with customers, not size, that really matter. Mr Kopper denied that German banks dominate industry. In 1976 the 10 largest private sector banks held 1.3 per cent of corporate capital; by the end of the 1980s, this fell to 0.6 per cent. Fewer than a tenth of supervisory board places in the top 100 firms were from banks, but one in two were from unions and staff.

Nevertheless, Mr Kopper confirmed the important part of the story: there is a long history of close relationships, through good and bad times, between banks and customers. He contrasted it with the 'transaction-related' approach elsewhere, which generated the property lending booms in the US and UK.

Relationship banking has become a buzz phrase in Britain during the recession. But it was rather forgotten during the 1980s boom. The secret of German banking is a blend of conservatism and consistency in lending to industry, not direct power or control in the boardrooms.