Bank Regulatory Structure:

The Federal Republic of Germany

GGD-94-134BR: Published: May 9, 1994. Publicly Released: May 9, 1994.

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Pursuant to a congressional request, GAO reviewed the German bank regulatory structure and its key participants, focusing on: (1) how the German bank structure functions; and (2) central bank responsibilities that affect the German banking industry.

GAO found that: (1) the German bank regulatory structure consists of both public and private participants; (2) two German federal agencies share certain regulatory responsibilities with external auditors and private banking associations and are considered equal partners in the formulation of regulatory policies; (3) the Bundesbank must approve regulations involving liquidity and capital requirements and changes to banks' monthly reporting requirements; (4) the Bundesbank has the most active role in day-to-day bank supervision; (5) the Bundesbank is very influential in determining the enforcement action taken by the Federal Bank Supervisory Office (FBSO) because of its detailed knowledge of the banks it supervises; (6) the Bundesbank and FBSO work together in managing individual bank crises; (7) in addition to its bank regulatory role, the Bundesbank has other bank related responsibilities such as payments clearance and currency delivery that it does not share with FBSO; (8) external auditors have the primary responsibility for conducting bank examinations; (9) in Germany, deposit insurance is provided by private banking associations, which also have a role in resolving failed banks; and (10) German bank regulators are satisfied with the regulatory system and believe the relationship between the Bundesbank and FBSO is excellent because each agency understands its role, and the legal responsibility for enforcement is clearly defined.

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