ABSTRACT
The German financial system has become the subject of increasing attention by economists and policy makers in both Europe and the United States. The process of economic and monetary unification initiated with the implementation of the Single Market Act and in prospect of a European Monetary Union is expected to increase competition in European Economic Community financial markets. Before the crisis of the 1920s the US financial system resembled the then more advanced European financial centres with widespread operation of what are now called universal banks. In difference from the US, the German banking crisis of the 1930s was not primarily the result of fraud or the use of deposit funds for speculation in capital markets. While balance sheet requirements can do much to curb the risk of maturity and interest rate mismatches which might occur under universal banking, they can do little to eliminate conflicts of interest.
