Comparative analysis of the banking system of Germany and the Republic of Kazakhstan
Table of contents: The Kazakh-American Free University Academic Journal №8 - 2016
Zhaylaubayeva Gulnara, Sarsen Amanzholov East-Kazakhstan State University, Kazakhstan
Chzhan Liliya, Sarsen Amanzholov East-Kazakhstan State University, Kazakhstan
In the modern market economy, a key element
of the state financial system are banks. The modern banking system of Kazakhstan was formed after the collapse of the USSR. Using the experience of other countries, there
was created a two-tier banking system, well adapted to the market economy.
National Bank of Kazakhstan is the central
bank and the first level of the banking system of the Republic of Kazakhstan. All other banks represent the second level of the banking system except for the Kazakhstan
Development Bank, which has a special legal status (1).
NBK as a regulator of the banking system of
Kazakhstan implements the following tasks:
• Develop and implement the monetary policy
of the state;
• Ensure the functioning of payment
• Implement currency regulation and
• Promote stability of the financial
• Regulate, control and supervise financial
market and financial organizations;
• Ensure an adequate level of protection of
the rights and legitimate interests of consumers of financial services;
• Implement statistical activities in the
field of monetary statistics and external sector statistics.
The organizational structure of the
National Bank of Kazakhstan is represented by the central unit, which consists
of 25 departments and 4 independent departments, and 16 territorial branches in
all regions of Kazakhstan (Iskakov, 2012).
National Bank within its competence
represents the interests of the Republic of Kazakhstan in relations with
central banks and banks of other countries, international banks and other
financial institutions. Activities of the National Bank to the extent of its
powers are independent. NBK coordinates its activities with the Government of
the Republic of Kazakhstan and accountable to the President of the Republic of Kazakhstan.
As of January 1, 2016 the banking sector of
the Republic of Kazakhstan is represented by 35 banks. The total assets of the
banking sector in Kazakhstan is 23.4 trillion KZT. The loan portfolio of the
sector is 15.5 trillion KZT.
The level of competition in the banking
sector is average. In general, Kazakhstan STB can be divided into three tiers.
The first tier-are "largest banks", which have long been in the
banking sector; the volume of their assets exceeds US $ 10 billion, with a
market share of over 10% (3).
The second tier–are the so-called
"locomotives of growth" and the banks in a transition period. These
are young, actively developing banks expanding their market share, as well as
big banks, not included in the first tier. Both groups are characterized by the
amount of assets of US $ 4 billion and a market share of more than 4%.
The third tier -are small banks supporting
various niches for their activities.
There is a trend to increase market
concentration, so for the year 2015, the value of the Herfindahl-Hirschman
Index (indicator of the degree of monopoly in the industry) was 1017 that
characterizes moderately concentrated markets. 5 largest private banks control
59.2% of total banking sector assets. Presumably, more than a half of the
entire banking infrastructure - network of branches and ATMs - are in these
In 2015, there was a merger of such banks
as JSC "Alliance Bank", JSC "Temirbank", and JSC
«ForteBank» into the group of JSC «ForteBank»; JSC "Kazkommertsbank"
with JSC "BTA Bank". In addition, JSC "Halyk Bank of Kazakhstan" has purchased JSC "HSBC Bank of Kazakhstan", which was renamed in JSC
«Altyn Bank» (4).
In the short term, mergers and acquisitions
are not expected. However, in the long term, such a probability is stored. This
is due to the introduction of Basel III standards, and above all, to the
capital requirements, as one of the key events in the sphere of banking control
and regulation. In 2019, it is planned to increase the requirement for minimum
equity capital to 100 billion KZT. To date, this requirement is met only by 7 banks.
The banking system of Germany in its modern form emerged in the mid-1950s having inherited almost all of the basic
features of the banking system of pre-war Germany and getting the best that appeared
in the banking systems of different countries. It is a set of financial institutions,
which accumulate free money capital, incomes and savings of various layers of
the society and give them as a loan to enterprises, government and individuals.
It consists of two main tiers - central bank and commercial banks, and
specialized credit institutions (5).
In Germany, the number of credit institutions
exceeds 4000, including 1 000 medium and small banks. Totally, together with
subsidiaries, for 80 million people there are 49 thousand credit institutions.
The banking system in Germany (two-tier) includes:
1) Deutsche Bundesbank (Federal Central
2) commercial (universal) banks;
3) savings banks;
4) co-operative central banks;
5) credit cooperatives;
6) special purpose banks (public and
7) postal, utility and savings banks;
8) specialized banks.
Federal Central Bank is the successor to
the German Central Bank - the Reichsbank - and has 9 land central banks as main
offices and about 200 major branches. The Central Bank is fully owned by the Federation
and acts as a federal entity. Tasks and rights of the Bank are defined by law.
Through this bank and its subsidiaries, the bulk of non-cash payments with the
use of checks and bills is held.
German Bundesbank’s central headquarters is
located in Frankfurt city. Its activities are regulated by the German Law
"On German Federal Bank".
The Central Bank is managed by the
collective body in the face of the Central Council, consisting of nine main
departments of the bank headed by the Director.
It should be noted that the management of
the Bundesbank has full integrity in decision-making. In this case, the Orders
of the Federal Government of Germany, are not binding for the Central Bank and
may be accepted for consideration only as study or guidance documents. This
approach to the activities of the Central Bank of Germany has received broad support
from the majority of European countries.
The main function of the Bundesbank is to
ensure stability of the national currency, so in the work the bank has a monopoly
on the issuance of new notes and uses a range of monetary-policy tools to
regulate money circulation and credit conditions of the economy. This is connected
with such popularity of auctions in Germany.
Commercial (universal) banks are the second
tier in the banking system and they carry out operations for receiving funds in
deposits, provide a variety of services, including financial and trust. The
largest German universal banks – Deutsche Bank, Commerzbank и Dresdener Bank -
perform practically all kinds of operations, excluding the issue of banknotes
and the provision of mortgage credit. Traditionally, all commercial banks in Germany are divided into three groups:
1) private (loan) banks, including 3 large
regional ones, other credit banks and subsidiaries of foreign banks - on the
whole about 350. This group performs 43% of all bank operations and has an extensive
2) more than 70 public-law savings banks
and land banks, performing half of bank operations. Their activities are focused
mainly on maximizing profits. These include:
- 11 land banks (Landesbank), which clients
are governments of federal states and large corporations;
- a network of savings banks (Sparkasse),
which are subject to Land banks and work with private investors (the proceeds
go to support of small and medium-sized businesses; for a total of 500 savings
banks provide 42% of loans);
- KfW - Banking Group, which provides
funding for various government projects (support for small and medium enterprises,
affordable housing and infrastructure development, improvement of the energy
3) almost 3 thousand cooperative banks and
their central banks, performing about 20% of the operations of all banks.
- DZ Bank and WGZ-Bank perform the
functions of the central banks in the sector, serve large corporate clients;
- 1254 banks of Volksbank and Raiffeisenbank;
more than a half of customers (16 million) are also shareholders of these banks
(originally Volksbanken and Raiffeisenbanken were mutual-aid funds for small
and medium-sized businesses, and now the main task of the bank is to support
the business (primarily of shareholders themselves);
- Church banks, for example - Spar- &
Kreditbank Evangelisch-Freikirchlicher Gemeinden;
- Sector banks, such as Beamtenbank («Bank
of civil servants»), Deutsche Apotheker & Ärztebank («Bank of the
German pharmacists and doctors");
- Other cooperative banks.
To represent their interests in legislative,
supervisory and other public authorities, all of the groups of banks are united
in associations operating at the level of the Federation. Federal Office for
the Supervision of the banking business in Berlin carries out state supervision
of all credit institutions. Federal Office is an independent federal supreme
authority, which obeys the instructions and the service supervision of the
Federal Minister of Finance.
The main advantage of the German universal
banking system in comparison with Kazakhstan, in which the bank functions are
separated, is a higher stability on the basis of diversification effects and
high reliability of deposits associated with it. Acting on a universal basis,
the bank provides the customer with a wide range of operations and services,
thereby having the possibility of redistribution of income and losses from the
banking business. In Germany, there are also specialized banks, special purpose
banks, credit cooperatives.
Currently in the country there are more
than 4500 generic and more than 200 specialized commercial banks offering a
full range of banking services. Of particular note is the possibility of German
customers of banks to carry out operations on foreign markets, while at the
same time anywhere in the world (6).
The institutional structure of the German
banking system is represented by a three-tier model.
The first tier is occupied by the State
Bank of Germany (Bundesbank) and the banks of the federal lands. The Bundesbank
implements the monetary policy aimed at price stability in the euro area, bank
supervision and control. Banks of federal lands are a group of nine banks with
state participation, arranged in the regions, and mainly serving large institutional
clients. They are umbrella organizations for savings banks.
The second tier is represented by
commercial banks: private, public-law, cooperative and with foreign
participation. A distinctive feature of the German banking system is that the
second-tier banks in Germany carry out a variety of operations, from universal
to specialized. Although private, public-law and cooperative banks in Germany have differences in their policies, there is no specialization and "banking labor
division" associated with it, as in the UK or France.
The leading role in the cluster of private
banks play four transnational largest banks in Germany, namely: Deutsche Bank,
Commerzbank, Unicredit Bank, Postbank. Besides these, private banks include
regional universal and specialized banks: mortgage banks, banks with a remote
form of service, building funds.
Public-law banks are savings banks that
serve customers within a single federal state, and their numerous branches, as
well as regional banks owned by federal states. These lending institutions are
the foundation of the state's presence in the German economy. They were created
for concessional lending to local manufacturers, whereby the need to promote economic
growth of the region. It is for this reason that their objective is not to maximize
profits, so banks are allowed to operate only within their region. This bank
cluster is the largest in the number of credit institutions in the German
banking system, and its share in the German banking sector's total assets
currently stands at 50%.
Cooperative banks adhere to the regional
principle in their activities since, as well as savings banks, they are not allowed
to provide their services in areas not related to the place of their
Development banks play the leading role in
the innovative financing of the German economy. The German Development Bank
Group (KfW Bankengruppe) is a leading strategic partner of the German
government and the largest corporations in Germany. Among the main functions of
KfW are promoting economic development, social security and ecology in Germany, Europe and the rest of the world. To meet these challenges, the banking group is divided
into several specialized banks: Bank for development of small and medium
enterprises; Bank for assistance in the field of housing, infrastructure, education,
social issues; Bank for international export and project finance; Bank for assistance
to developing countries and countries with economies in transition. The Bank
Group is advising the German government on privatization of the state shares of
banks and financial institutions. Agricultural Rental Bank provides financial
support to the subjects of the country's agro-industrial complex.
In the third tier of the German banking
system are microfinance institutions: savings banks, building and savings associations,
regional community credit cooperatives and credit cooperatives.
According to the German Federal Bank,
despite the financial crisis, in 2016 the amount of private savings of physical
persons in Germany continues to rise. At the end of the second quarter of 2016
German residents owned cash, bank deposits, securities and insurance policies
for a total of 5.401 trillion euros. This is 169 billion more than in 2015. At
the same time, debts and obligations under the German citizens loans increased
by 45 billion euros to a total of 1.645 trillion euros.
Despite this, German banks earn less - and
this applies not only to large financial institutions, but also to small banks.
Low interest rate policy pursued by the ECB, makes basic banking business unprofitable.
The content of the branch network, customer consultation - all this takes time
and money. As a result: almost every German bank has now increased the service
costs, some of them even introduced a negative interest rate - for keeping
money in their accounts they pay for themselves.
On top of that, competition from banks,
existing only on the Internet is growing. They do not have their own branches,
the staff is significantly less, for cash they are offering to use ATMs of
other banks. The so-called Fin Tech - startups in the field of financial
services - offer some of the classic banking services, and thus avoid the
Stringent requirements to conduct banking
activities, established after the 2008 financial crisis, have the reputation of
a "killer" of small banks. For example, when advising clients about
the various possibilities of investing money, one must adhere to strict
criteria, "but only if you are a bank and provide classic consultancy
services" - emphasizes Hans-Peter Burghof, professor and banking expert of
Hohenheim University. "If the recommendations are provided by an online
brokerage platform, and with a note that this is not a recommendation, it
cannot be brought for breaking the rules", - adds Burghof (7).
Thus, the German banks should be prepared
for the technological revolution and the considerable attention should be paid
to financial innovation.
Banks are the main financial intermediaries
in the market economy. In the normal course of business, they create new
requirements and commitments, which become a commodity in the money market.
The banking systems of the Republic of Kazakhstan and Germany are similar and have the problems faced by all banks in the
world. In the future, institutions of the financial sector through innovation
will solve these problems.
The development of the stock market, legal
and regulatory framework governing the activities of banks, banking supervision
policies, internal control system, and international cooperation will facilitate
the steps of the banking systems of the Republic of Kazakhstan and Germany to a new level, the improvement of their operations and the trust of the people.
2. Iskakov, U.M. (2012).
«Financial markets and intermediaries». Collection of lectures (p. 287). Almaty: Economica Publishers.
3. http: // www. company-taxes. info/ Agency on Statistics of RK Report for
4. http: // sasconcierge.com/ru
5. http: // www.riarating.ru/
6. http: // www.dw.com/ru/
Table of contents: The Kazakh-American Free University Academic Journal №8 - 2016