The impact of German and International Banks on International Trade?

Germany has managed to develop knowledge that is now essential for  technological development and the new markets created by globalization. It is one of the most innovative countries and its environment to conduct business stands out. The large entities in the German and international banking sector are established in Munich and Frankfurt. The latter is one of the most important financial centers in the world and the financial capital of Germany. At a national level, the number of independent organizations indicate a very low level of concentration in the German banking sector (Detzer et al, 2017). However, not everything is positive: Bad management in financial institutions is evident. The prominent role of foreign investors in German financial markets and the Deutsche mark in international finance means that an international turbulence has been quickly transmitted to the German markets (International Monetary Fund, 1989).

Hundreds of commercial banks – the European Central Bank, the German stock exchange, the Bundesbank, which is the German central bank and its branches,  such as the Commerzbank and other foreign banks – are evidence of the financial state of the city . The banking crisis led  to a contraction in the supply of money and, thereby, to an increase in the likeliness of recession (Dietrich, 2009). Last year, the bad image of certain banks in Germany was evidenced by scandals produced by  accusations against employees that had already been blamed for helping to launder money. Even though investigations proved their innocence, the controversy ended up affecting the financial activities and their relationships with banks in the international market. Over the last few years, the main objective of regulatory efforts at international, European and national level has been to  rebuild trust in the financial markets (Akyol et al, 2016).

Which sector of the economy is the one which suffer the most with the impact of new markets? In this case the industrial sector has been the focus of a decline in jobs. It should be noted that such decline has also been caused by an increase in the use of new technology, necessary for the development of the country’s competitiveness. The banking sector is also at risk due to national and international lending and to unforeseeable changes in monetary and fiscal policy (Hermann, H., & Hudson, M., 2012). On the other hand, the service sector saw  seen a prominent increase of employment in 2019 in the countries that implemented the same measure. Stephen F. Szabo (2015) say:

Political leaders, in contrast, have an obligation to balance and weigh economic interests into a broader spectrum of values and interests and should do this in pursuit of the public or national interest. This is the distinction between the private and public sector. (p.53).

Compared to other countries, such as the United States, where Donald Trump has produced  uncertainty, the different changes in the structure of the German economy, it is still very satisfactory. The country has a tightly knit regulatory network in the banking sector (Kinsey, S., & Newton, L., 2016). Foreign direct investment has been for several decades a problem for Germany because, year after year, the capital investment is very low compared to other States with similar economies, which does not allow them to acquire some advantages that if they enjoy countries with a higher level of investment. The terrible dictatorship which such a big country as Germany had to live through in the recent past comes to mind, as we look upon the decline of freedom in so many countries today  (Ludwig von Mises, 2006).

The other administrative powers are related to continued surveillance of the compliance of firms already operating in the market, following standards set by the law (Grote, R., & Marauhn, T., 2006). All of the above has consequences in the present, since the problems between the U.S.A. and China have complicated the world panorama and generated uncertainty in the markets, leading to low investment and a decrease in consumption.

The leading characteristic of the German banking system as it evolved in the second half of the nineteenth century was certainly not its international orientation. Like the German economy itself during this period, German banks were dominated by the financial opportunities created by domestic social overhead and industrial investment (Rondo Cameron, 1991, p.90)

In the case of Germany, the country’s growth has been affected by this  and it is necessary to propose friendly policies with investors which will generate more investment in the country and will help to overcome the economic deceleration they are facing. 

References

Akyol, Y. (2016). Banking Business in Germany. Banking Business in Germany, 3.

Cameron, R. (1991). International Banking 1870-1914. New York: Oxford University Press.

Detzer, D. (2017). The German Financial System and Financial and Economic Crisis. Springer. doi:10.1007/978-3-319-56799-0_7

Dietrich, B. H. (2009). German Banking Structure, Pricing and Competition. 23.

Fund, I. M. (1989). Federal Republic of Germany: Adjustment in a Surplus Country, 10.

Grote, R. &. (2006). The regulation of international financial markets: perspectives for reform., 82.

Hermann, H. &. (2012). Banking and Finance in West Germany.

Kinsey, S. &. (2016). Panel Discussion: European Banking in the Past, Present and Future. International Banking In An Age Of Transition.

Mises, L. v. (2006). Policies and Ideas . Economic Policy Thoughts for Today and Tomorrow, 101.

Szabo, S. F. (2015). Germany, Russia, and the Rise of Geo-Economics. Bloomsbury.