DP5027 Funding Modes of German Banks: Structural Changes and its Implications

Author(s): Lars Norden, Martin Weber
Publication Date: April 2005
Keyword(s): banks, deposit taking, disintermediation, panel analysis
JEL(s): G21
Programme Areas: Financial Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=5027

This paper examines funding modes of German banks and its implications for lending and profitability over the period 1992-2002. Analysing individual bank data from the Deutsche Bundesbank, we first find that deposits from customers lose ground in relative terms while interbank liabilities increase as a source of funding. Second, we cannot detect a negative impact of the relative decline in deposits on the lending business. In contrast, loans to customers become even slightly more important. Third, the decreasing ability of banks to mobilize deposits from customers and the substitution of deposits by interbank liabilities unfavourably affects the net interest results of savings banks.