No Country for the Market: The Regulation of Finance in Germany after the Crisis

Abstract

The severity with which the financial crisis struck Germany in 2008 came as a shock to German elites. The relatively traditional shape of its bank-based financial system was supposed to isolate the country from the vagaries of Anglo-Saxon capitalism. Instead, the government was forced to unprecedented steps, such as the de facto nationalisation of banks and an unlimited guarantee on savings deposits. A comprehensive reform of financial regulation in the country seemed imperative. This article evaluates change in the institutional structure of financial sector regulation and supervision in Germany. The inconclusive debate about the reorganisation of financial supervision, the emergence of new regulation in the field of bank restructuring, and the attempted reform of the deposit insurance system are used as empirical cases. It is argued that the constraints of the German political system impeded the comprehensive reform that might have been expected after a major shock. Instead, a pattern of institutional layering was perpetuated which contains the germs of future dysfunctions.