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Teaching Within the framework of its cooperations with both German and foreign universities IWH researchers are actively committed to teaching by offering academic courses. These…
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Aktuelle Trends: Polarisierung des Hausbankprinzips in Deutschland
Michael Koetter, Felix Noth
Wirtschaft im Wandel,
No. 3,
2022
Abstract
Kleine und mittlere Unternehmen spielen eine tragende Rolle in der deutschen Wirtschaftsstruktur. Der Finanzierungsbedarf dieser Unternehmen wird dabei traditionell durch regional tätige Banken bedient, insbesondere durch dem Regionalprinzip verpflichtete Sparkassen in öffentlicher Hand und durch Genossenschaftsbanken, die sich ebenfalls in regional abgegrenzten Märkten um ihre Kunden kümmern.
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Xiang Li
IWH Discussion Papers,
No. 6,
2022
Abstract
By adopting a difference-in-differences specification combined with propensity score matching, I provide evidence using the microdata of German banks that stateowned savings banks have lent less than credit cooperatives during the COVID-19 crisis. In particular, the weaker lending effects of state-owned banks are pronounced for long-term and nonrevolving loans but insignificant for short-term and revolving loans. Moreover, the negative impact of government ownership is larger for borrowers who are more exposed to the COVID-19 shock and in regions where the ruling parties are longer in office and more positioned on the right side of the political spectrum.
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Political Cycles in Bank Lending to the Government
Michael Koetter, Alexander Popov
Review of Financial Studies,
No. 6,
2021
Abstract
We study how political party turnover after German state elections affects banks’ lending to the regional government. We find that between 1992 and 2018, party turnover at the state level leads to a sharp and substantial increase in lending by local savings banks to their home-state government. This effect is accompanied by an equivalent reduction in private lending. A statistical association between political party turnover and government lending is absent for comparable cooperative banks that exhibit a similar regional organization and business model. Our results suggest that political frictions may interfere with government-owned banks’ local development objectives.
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06.07.2020 • 13/2020
IWH issues warning of a new banking crisis
The coronavirus recession could mean the end for dozens of banks across Germany – even if Germany survives the economic crisis relatively unscathed. An analysis by the Halle Institute for Economic Research (IWH) shows that many savings banks and cooperative banks are particularly at risk. Loans worth hundreds of billions of euros are on the balance sheets of the financial institutions concerned. IWH President Gropp warns of a potentially high additional burden for the already weakened real economy.
Reint E. Gropp
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The Corona Recession and Bank Stress in Germany
Reint E. Gropp, Michael Koetter, William McShane
IWH Online,
No. 4,
2020
Abstract
We conduct stress tests for a large sample of German banks across different recoveries from the Corona recession. We find that, depending on how quickly the economy recovers, between 6% to 28% of banks could become distressed from defaulting corporate borrowers alone. Many of these banks are likely to require regulatory intervention or may even fail. Even in our most optimistic scenario, bank capital ratios decline by nearly 24%. The sum of total loans held by distressed banks could plausibly range from 127 to 624 billion Euros and it may take years before the full extent of this stress is observable. Hence, the current recession could result in an acute contraction in lending to the real economy, thereby worsening the current recession , decelerating the recovery, or perhaps even causing a “double dip” recession. Additionally, we show that the corporate portfolio of savings and cooperative banks is more than five times as exposed to small firms as that of commercial banks and Landesbanken. The preliminary evidence indicates small firms are particularly exposed to the current crisis, which implies that cooperative and savings banks are at especially high risk of becoming distressed. Given that the financial difficulties may seriously impair the recovery from the Covid-19 crisis, the pressure to bail out large parts of the banking system will be strong. Recent research suggests that the long run benefits of largely resisting these pressures may be high and could result in a more efficient economy.
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Bank Overall Financial Strength: Islamic Versus Conventional Banks
Michael Doumpos, Iftekhar Hasan, Fotios Pasiouras
Economic Modelling,
2017
Abstract
A number of recent studies compare the performance of Islamic and conventional banks with the use of individual financial ratios or efficiency frontier techniques. The present study extends this strand of the literature, by comparing Islamic banks, conventional banks, and banks with an Islamic window with the use of a bank overall financial strength index. This index is developed with a multicriteria methodology that allows us to aggregate various criteria capturing bank capital strength, asset quality, earnings, liquidity, and management quality in controlling expenses. We find that banks differ significantly in terms of individual financial ratios; however, the difference of the overall financial strength between Islamic and conventional banks is not statistically significant. This finding is confirmed with both univariate comparisons and in multivariate regression estimations. When we look at the bank financial strength within regions, we find that conventional banks outperform both the Islamic banks and the banks with Islamic window in the case of Asia and the Gulf Cooperation Council; however, Islamic banks perform better in the MENA and Senegal region. Second stage regressions also reveal that the bank overall financial strength index is influenced by various country-specific attributes. These include control of corruption, government effectiveness, and operation in one of the seven countries that are expected to drive the next big wave in Islamic finance.
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Do Local Banking Market Structures Matter for SME Financing and Performance? New Evidence from an Emerging Economy
Iftekhar Hasan, Krzysztof Jackowicz, Oskar Kowalewski, Łukasz Kozłowski
Journal of Banking and Finance,
2017
Abstract
This paper investigates the relationship between local banking structures and SMEs’ access to debt and performance. Using a unique dataset on bank branch locations in Poland and firm-, county-, and bank-level data, we conclude that a strong position for local cooperative banks facilitates access to bank financing, lowers financial costs, boosts investments, and favours growth for SMEs. Moreover, counties in which cooperative banks hold a strong position are characterized by a more rapid pace of new firm creation. The opposite effects appear in the majority of cases for local banking markets dominated by foreign-owned banks. Consequently, our findings are important from a policy perspective because they show that foreign bank entry and industry consolidation may raise valid concerns for SME prospects in emerging economies.
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Banks and Sovereign Risk: A Granular View
Claudia M. Buch, Michael Koetter, Jana Ohls
Journal of Financial Stability,
2016
Abstract
We investigate the determinants of sovereign bond holdings of German banks and the implications of such holdings for bank risk. We use granular information on all German banks and all sovereign debt exposures in the years 2005–2013. As regards the determinants of sovereign bond holdings of banks, we find that these are larger for weakly capitalized banks, banks that are active on capital markets, and for large banks. Yet, only around two thirds of all German banks hold sovereign bonds. Macroeconomic fundamentals were significant drivers of sovereign bond holdings only after the collapse of Lehman Brothers. With the outbreak of the sovereign debt crisis, German banks reallocated their portfolios toward sovereigns with lower debt ratios and bonds with lower yields. With regard to the implications for bank risk, we find that low-risk government bonds decreased the risk of German banks, especially for savings and cooperative banks. Holdings of high-risk government bonds, in turn, increased the risk of commercial banks during the sovereign debt crisis.
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Die Entwicklung der Corporate Governance deutscher Banken seit 1950
R. H. Schmidt, Felix Noth
Bankhistorisches Archiv,
No. 2,
2011
Abstract
The present paper gives an overview of the development of Corporate Governance of German banks since the 1950s. The focus will be on economic analysis. The most striking changes in Corporate Governance occurred with the ownership structure of commercial banks, in particular with the major joint-stock banks. In addition to that, the capital market has become a core element of Corporate Governance in all major German banks, which have replaced their prior concentration on the interests of a broadly defined circle of stakeholders by a one-sided concentration on shareholders’ interests. In contrast, with savings banks and cooperative cooperative banks, Corporate Governance has remained unchanged for the most part. Exceptions to this are the regional state banks: in their case, after they had turned away from traditional business models and in particular following the discontinuation of the guarantee obligation, the problems of their Corporate Governance, which were already discernible beforehand, became quite obvious. If you include the financial crisis, beginning in 2007, in the analysis, it becomes evident that it was precisely a Corporate Governance unilaterally geared to shareholders’ interest and the efficiency of the capital market that materially contributed to the evolution and widening of the crisis.
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