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Saving Bank Sector
Savings bank sector had the largest share of any category of bank in the domestic volume of business. The saving banks originally conceived not as commercial profit making concerns but to serve relatively less well-off members of the community, to give credit on favourable terms to public authorities and to finance local investment of benefit to the region in which the saving bank was located. Although, these banks do follow these obligations but with the passage of time, they had become universal banks which compete with the commercial banks for most forms of banking business.
There are three tiers within the saving bank sector. These are:
- Local saving banks
- State saving banks
- Central saving banks
Local saving banks
These are municipal or district institutions incorporated under public law as independent legal entities. Each state had its own Savings Bank Act, which specifies the structure and organization of the saving banks in that state. A local saving bank is usually permitted to operate only in its own region and its investment in securities and other assets are subject to restrictions.
State saving banks (Central Giro Institutions)
Each state saving bank is incorporated under public law and is owned by its respective state government and state saving bank association. The state saving banks work as clearing houses for their member local saving banks. They are state bankers in their respective states and can conduct their business on interregional and international basis. The largest state saving bank is the Westdeutsche Landesbank Girozentrale, which is roughly comparable to Commerzbank in terms of balance sheet assets.
Central saving banks
Deutsche Girozentrale (DGZ) serves as the central clearing bank for the saving bank system and holds the liquidity reserves for the state saving banks. This is similar to state saving banks in terms of business it conducts, but it is smaller in size than many of them.
Although, both local saving banks and state saving banks are universal banks, some activities such as securities trading underwriting and international business are more important for state saving banks.
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