In terms of creating new ways to please its target market, the global banking sector appears to be evolving at an exciting rate. Yet, there are restrictions that banks must follow in order to remain as accountable as feasible. In this regard, Germany recently overhauled most of its banking legislation in order to improve performance, particularly in the European Union. According to Rom and Herz (2017), the German banking sector will have to consider less risk taking and reliability in the future, in addition to other banking laws. The significance of the two is that they enable for greater transparency and protection of the target population. Rom & Herz (2017) explains that when it comes to reliability, the management board ought to be held more accountable. As such, not only will banks be allowed to enlist their own strategies but for the general well being of the population, they have to adhere to the set regulations. In more ways than one, these regulations protect the tax payers; govern against anti laundering and more importantly, accounting transparency.
By comparing the German banking regulations to those of the United States, the fives ways in which they differ include the following. According to Deloitte Risks (2017), in Germany, given that they operate both independently and under the European Union, the banks are allowed to have high loan to deposit ratios unlike in the United States. This means that German banks are allowed to lend out more than they can actually deposit while for the United States, bank lending is often pegged to their capital deposits with the Federal.
The second difference is that associated with risk. As mentioned above, German banks will have to undertake less risk in their operations with the objective of protecting the interest of the customers. However, for U.S. banks, Pisani (2011) is of the opinion that the risks banks wish to take depends on the capital that the bank has. Therefore, instead of having a general risk level for all banks to respect as the case in Germany, the capital associated with a U.S. bank gives it a limit at which risk it ought to take.
There is also the difference of customer access to services as compared to the two countries. In Germany, regulations allow for the banks to be more generous in how they can serve their customers in that it is easier for the latter to instruct the previous on what to do with their account. For security reasons, the same luxury is not permitted for the United States banking system. Deloitte Risks (2017) explains that regulations are in place that forces the banks not to be lenient as they would want to with their customers. Therefore, there is a great difference in online banking as understood in German and in the United States.
The fourth difference has to do with accountability where in the U.S., more emphasis is placed on the quality of data reporting that should allow for transparency (Kinkartz, 2013). In German, the regulations doll for not only call for quality data reporting but managerial responsibility as well. The last difference is banking supervision. Both countries have governmental bodies that supervise banking activities but in Germany, Kinkartz (2013) explains that there might be a problem given that fiscal policy and supervision cannot be separate entities thus a problem in interests.
References
Deloitte Risks (2017). 2017 Banking Regulatory Outlook. Retrieved from http://deloitte.wsj.com/riskandcompliance/2017/03/06/2017-banking-regulatory-outlook/
Kinkartz, S. (2013). Germany beefs up banking regulations. Retrieved from http://www.dw.com/en/germany-beefs-up-banking-regulations/a-16822228
Pisani, B. (2011). European Banks vs. US Banks: Big Difference. Retrieved from http://www.cnbc.com/id/37237500
Rom, M. & Herz, B. (2017). Banking Regulations 2017. Retrieved from https://www.globallegalinsights.com/practice-areas/banking-and-finance/global-legal-insights---banking-regulation-4th-ed./germany
