Funding Modes of German Banks: Structural Changes and its Implications
Journal of Financial Services Research, Vol. 38, pp. 69-93, 2010
43 Pages Posted: 13 Apr 2005 Last revised: 31 Jan 2012
Date Written: 2010
We investigate the funding modes of German banks and the implications for lending and profitability during 1992-2002. We find that at many banks, deposits from customers decrease in relative terms while interbank liabilities increase as a source of funding. We cannot detect a negative impact of the relative decline in deposits on lending. The decreasing ability of banks to collect deposits and the substitution of deposits by interbank liabilities unfavorably affects the net interest result of banks that exhibit a deposit deficit, especially savings banks. Our findings indicate a creeping disintermediation, which leads to a lengthening of the intermediation chain.
Keywords: Universal banking, Deposit taking, Interbank markets, Disintermediation
JEL Classification: G20, G21
Suggested Citation: Suggested Citation