Palgrave Macmillan Studies in Banking and Financial Institutions Series Editor: Professor Philip Molyneux The Palgrave Macmillan Studies in Banking and Financial Institutions are international in orientation and include studies of banking within particular countries or regions, and studies of particular themes such as Corporate Banking, Risk Management, Mergers and Acquisitions, etc The books’ focus is on research and practice, and they include up-to-date and innovative studies on contemporary topics in banking that will have global impact and influence Titles include: Yener Altunbas˛, Blaise Gadanecz and Alper Kara SYNDICATED LOANS A Hybrid of Relationship Lending and Publicly Traded Debt Yener Altunbas˛, Alper Kara and Öslem Olgu TURKISH BANKING Banking under Political Instability and Chronic High Inflation Elena Beccalli IT AND EUROPEAN BANK PERFORMANCE Paola Bongini, Stefano Chiarlone and Giovanni Ferri (editors) EMERGING BANKING SYSTEMS Vittorio Boscia, Alessandro Carretta and Paola Schwizer CO-OPERATIVE BANKING: INNOVATIONS AND DEVELOPMENTS Santiago Carbó, Edward P.M Gardener and Philip Molyneux FINANCIAL EXCLUSION Allessandro Carretta, Franco Fiordelisi and Gianluca Mattarocci (editors) NEW DRIVERS OF PERFORMANCE IN A CHANGING FINANCIAL WORLD Dimitris N Chorafas FINANCIAL BOOM AND GLOOM The Credit and Banking Crisis of 2007–2009 and Beyond Violaine Cousin BANKING IN CHINA Franco Fiordelisi and Philip Molyneux SHAREHOLDER VALUE IN BANKING Hans Genberg and Cho-Hoi Hui THE BANKING CENTRE IN HONG KONG Competition, Efficiency, Performance and Risk Carlo Gola and Alessandro Roselli THE UK BANKING SYSTEM AND ITS REGULATORY AND SUPERVISORY FRAMEWORK Elisabetta Gualandri and Valeria Venturelli (editors) BRIDGING THE EQUITY GAP FOR INNOVATIVE SMEs Munawar Iqbal and Philip Molyneux THIRTY YEARS OF ISLAMIC BANKING History, Performance and Prospects Sven Janssen BRITISH AND GERMAN BANKING STRATEGIES Kimio Kase and Tanguy Jacopin CEOs AS LEADERS AND STRATEGY DESIGNERS Explaining the Success of Spanish Banks M Mansoor Khan and M Ishaq Bhatti DEVELOPMENTS IN ISLAMIC BANKING The Case of Pakistan Mario La Torre and Gianfranco A Vento MICROFINANCE Philip Molyneux and Munawar Iqbal BANKING AND FINANCIAL SYSTEMS IN THE ARAB WORLD Philip Molyneux and Eleuterio Vallelado (editors) FRONTIERS OF BANKS IN A GLOBAL WORLD Anastasia Nesvetailova FRAGILE FINANCE Debt, Speculation and Crisis in the Age of Global Credit Dominique Rambure and Alec Nacamuli PAYMENT SYSTEMS From the Salt Mines to the Board Room Catherine Schenk (editor) HONG KONG SAR’s MONETARY AND EXCHANGE RATE CHALLENGES Historical Perspectives Andrea Schertler THE VENTURE CAPITAL INDUSTRY IN EUROPE Alfred Slager THE INTERNATIONALIZATION OF BANKS Noël K Tshiani BUILDING CREDIBLE CENTRAL BANKS Policy Lessons for Emerging Economies Palgrave Macmillan Studies in Banking and Financial Institutions Series Standing Order ISBN 978–1–4039–4872–4 You can receive future titles in this series as they are published by placing a standing order Please contact your bookseller or, in case of difficulty, write to us at the address below with your name and address, the title of the series and one of the ISBNs quoted above Customer Services Department, Macmillan Distribution Ltd, Houndmills, Basingstoke, Hampshire RG21 6XS, England British and German Banking Strategies Sven Janssen © Sven Janssen 2009 All rights reserved No reproduction, copy or transmission of this publication may be made without written permission No portion of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, Saffron House, 6-10 Kirby Street, London EC1N 8TS Any person who does any unauthorized act in relation to this publication may be liable to criminal prosecution and civil claims for damages The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act 1988 First published 2009 by PALGRAVE MACMILLAN Palgrave Macmillan in the UK is an imprint of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS Palgrave Macmillan in the US is a division of St Martin's Press LLC, 175 Fifth Avenue, New York, NY 10010 Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries ISBN-13: 978–0–230–22048–5 hardback ISBN-10: 0–230–22048–7 hardback This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources Logging, pulping and manufacturing processes are expected to conform to the environmental regulations of the country of origin A catalogue record for this book is available from the British Library A catalog record for this book is available from the Library of Congress 10 18 17 16 15 14 13 12 11 10 09 Printed and bound in Great Britain by CPI Antony Rowe, Chippenham and Eastbourne Contents List of Tables and Figures ix Abbreviations xi Acknowledgements xiii Preface xiv Setting the Scene What Is a Bank? 2.1 Introduction 2.2 The rationale for banking regulation 2.3 Legal definition of a bank in the European Union 2.4 Legal definition of a bank in the United Kingdom 2.5 Legal definition of a bank in Germany 2.6 Microeconomic definition of a bank 2.7 Macroeconomic definition of a bank Corporate Strategy Analysis and Applicability to the Banking Sector 3.1 Introduction 3.2 Strategy analysis in its historical context 3.3 A multifaceted term: “strategy” as it is used in this book 3.3.1 Strategy as plan 3.3.2 Strategy as pattern and structure 3.3.3 Strategy as perspective 3.3.4 Strategic positioning 3.3.5 Strategy as ploy and tactic 3.3.6 Between micro and macrostructure: “strategy” in this book 3.4 Economic structures revisited – competitive forces in the banking industry 3.4.1 A framework for competition analysis 3.4.2 Barriers to entry in banking 3.4.3 Analysis of competition among established players in a banking market 3.4.4 The substitution problem for banking products and services 3.4.5 The bargaining power behind a bank’s asset-liability management 8 10 10 12 15 17 19 19 21 27 27 29 30 31 33 34 35 36 38 42 44 47 v 9780230_220485_01_prexiv.indd v 2/11/2009 5:26:35 PM vi Contents 3.5 A bank’s resources determine its core competence 3.6 Banking: the link between micro- and macrostructures British and German Banking: Case Studies 4.1 Introduction 4.2 The Royal Bank of Scotland plc 4.2.1 Introduction and status quo in 1993 4.2.2 Income structure 4.2.2.1 Structural overview 4.2.2.2 Corporate and investment banking 4.2.2.3 Asset management 4.2.2.4 Retail banking 4.2.3 Cost and risk management 4.2.4 Asset-liability structure 4.2.5 Profitability 4.2.6 Conclusion 4.3 Deutsche Bank AG 4.3.1 Introduction and status quo in 1993 4.3.2 Income structure 4.3.2.1 Structural overview 4.3.2.2 Corporate and investment banking 4.3.2.3 Asset management 4.3.2.4 Retail banking 4.3.3 Cost and risk management 4.3.4 Asset-liability structure 4.3.5 Profitability 4.3.6 Conclusion 4.4 HSBC Holdings plc 4.4.1 Introduction and status quo in 1993 4.4.2 Income structure 4.4.2.1 Structural overview 4.4.2.2 Corporate and investment banking 4.4.2.3 Asset management 4.4.2.4 Retail banking 4.4.3 Cost and risk management 4.4.4 Asset-liability structure 4.4.5 Profitability 4.4.6 Conclusion 4.5 Commerzbank AG 4.5.1 Introduction and status quo in 1993 4.5.2 Income structure 4.5.2.1 Structural overview 4.5.2.2 Corporate and investment banking 4.5.2.3 Asset management 4.5.2.4 Retail banking 55 60 65 65 78 78 80 80 82 83 84 88 91 93 94 95 95 96 96 98 100 102 105 107 109 110 112 112 114 114 117 119 120 122 124 126 127 128 128 130 130 133 134 137 Contents vii 4.5.3 Cost and risk management 4.5.4 Asset-liability structure 4.5.5 Profitability 4.5.6 Conclusion 4.6 Barclays plc 4.6.1 Introduction and status quo in 1993 4.6.2 Income structure 4.6.2.1 Structural overview 4.6.2.2 Corporate and investment banking 4.6.2.3 Asset management 4.6.2.4 Retail banking 4.6.3 Cost and risk management 4.6.4 Asset-liability structure 4.6.5 Profitability 4.6.6 Conclusion 4.7 HVB Group AG/Bayerische Vereinsbank AG 4.7.1 Introduction and status quo in 1993 4.7.2 Income structure 4.7.2.1 Structural overview 4.7.2.2 Corporate and investment banking 4.7.2.3 Asset management 4.7.2.4 Retail banking 4.7.3 Cost and risk management 4.7.4 Asset-liability structure 4.7.5 Profitability 4.7.6 Conclusion 4.8 Lloyds TSB plc 4.8.1 Introduction and status quo in 1993 4.8.2 Income structure 4.8.2.1 Structural overview 4.8.2.2 Corporate and investment banking 4.8.2.3 Asset management 4.8.2.4 Retail banking 4.8.3 Cost and risk management 4.8.4 Asset-liability structure 4.8.5 Profitability 4.8.6 Conclusion 4.9 Dresdner Bank AG 4.9.1 Introduction and status quo in 1993 4.9.2 Income structure 4.9.2.1 Structural overview 4.9.2.2 Corporate and investment banking 4.9.2.3 Asset Management 4.9.2.4 Retail banking 139 141 143 144 145 145 147 147 148 151 152 155 157 159 160 161 161 163 163 166 168 169 172 176 179 180 181 181 183 183 184 186 186 190 192 194 195 196 196 198 198 201 204 206 viii Contents 4.9.3 Cost and risk management 4.9.4 Asset-liability structure 4.9.5 Profitability 4.9.6 Conclusion 208 212 214 215 Conclusions 5.1 Introduction 5.2 Discussion of the findings from each case study 5.3 Cross-case pattern analysis 5.4 Bridging the micro/macro divide in European economic integration 5.5 Epilogue – daring an outlook 218 218 219 225 Bibliography & Sources 245 Index 287 233 241 List of Tables and Figures Tables 4.1 Aggregate data on the British and German banking sector 4.2 Comparison of average funding structures at Hypo-Bank and Vereinsbank between 1993 and 1997 4.3 Comparison of average asset structures at Hypo-Bank and Vereinsbank between 1993 and 1997 74 178 178 Figures 1.1 3.1 4.1 4.2 4.3 4.4 4.5 4.6 4.7 4.8 4.9 4.10 4.11 4.12 4.13 4.14 4.15 4.16 4.17 4.18 4.19 4.20 4.21 4.22 4.23 4.24 4.25 4.26 Longitudinal and cross-country comparison Banking structure 44 Real GDP-growth (1985–2005): United Kingdom and Germany 66 Inflation rates (1985–2005): United Kingdom and Germany 66 Unemployment rates (1985–2005): United Kingdom and Germany 67 RBS: income structure 80 RBS: cost to income ratio and loan loss provisions 88 RBS: asset structure 91 RBS: liabilities and equity structure 92 Deutsche Bank: income structure 97 Deutsche Bank: cost to income ratio and loan loss provisions 106 Deutsche Bank: liabilities and equity structure 108 Deutsche Bank: asset structure 108 HSBC Holdings: income structure 115 HSBC Holdings: cost to income ratio and loan loss provisions 122 HSBC Holdings: liabilities and equity structure 124 HSBC Holdings: asset structure 125 Commerzbank: income structure 131 Commerzbank: cost to income ratio and loan loss provisions 139 Commerzbank: asset structure 141 Commerzbank: liabilities and equity structure 142 Barclays: income structure 148 Barclays: cost to income ratio and loan loss provisions 155 Barclays: liabilities and equity structure 157 Barclays: asset structure 158 HVB Group: income structure 164 HVB Group: cost to income ratio and loan loss provisions 173 HVB Group: asset structure 176 ix 9780230_220485_01_prexiv.indd ix 2/11/2009 5:26:35 PM Bibliography & Sources 277 Süddeutsche Zeitung (2001a) HypoVereinsbank bündelt Finanzierung Munich: Süddeutsche Zeitung, February 2001 Süddeutsche Zeitung (2001b) HypoVereinsbank mit Filialgeschäft unzufrieden Munich: Süddeutsche Zeitung, March 2001 Süddeutsche Zeitung (2001c) HypoVereinsbank hofft auf Synergieeffekte Munich: Süddeutsche Zeitung, 18 July 2001 Süddeutsche Zeitung (2001d) 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AG Annual Repport 2002 Wolfsburg: Volkswagen AG F) Publications by governments, national and international organisations Bank for International Settlement (2002) Interest Rate Risk and Bank Net Interest Margins Basel: BIS Quarterly Review, December 2002 Bank for International Settlements (2003a) Consultative Document: Overview of The New Basel Capital Accord Basle: Bank for International Settlements Bank for International Settlements (2003b) The New Basel Capital Accord, 20 August 2003 Basle: Bank for International Settlements British Banker’s Association Available from: http://www.jmlsg.org.uk/bba/jsp/ polopoly.jsp?d=469&a=5524 [Accessed 19 May 2007] Bundesverband Deutscher Banken (2004) Banking Survey 2004 Berlin: Bundesverband Deutscher Banken 284 Bibliography & Sources European Central Bank (1999) Possible Effects of EMU on the EU Banking Systems in the Medium to Long Term Frankfurt European Central Bank European Central Bank (2000) Mergers and Acquisitions Involving the EU Banking Industry – Facts and Implications Frankfurt: European Central Bank European Central Bank (2001) Characteristics of Corporate Finance in the Euro Area ECB Monthly Bulletin, February 2001, pp 37–50 Frankfurt: European Central Bank European Commission (1997) The Single Market Review – Impact on Services: Credit Institutions and Banking Subseries Vol Office for Official Publications of the European Communities London: Kogan Page Publishers European Commission (1999) Implementing the Framework for Financial Services: Action Plan COM(1999)232 11.05.99 Brussels European Commission (2001) Final Report of the Committee of Wise Men on The Regulation of European Securities Markets 15 February 2001 Brussels European Commission (2002a) Report by the Economic and Financial Committee (EFC) on EU financial integration Economic Papers No 171 Brussels European Commission (2002b) European Economy 2002 Number Brussels European Council (2002) Presidency Conclusions – Barcelona European Council, 15 and 16 March 2002 Brussels European Court of Justice (1981) Judgement of the European Court of Justice of 14 July 1981, Gerhard Züchner vs Bayerische Vereinsbank AG Case 172/80 European Round Table of Industrialists (1999) European Pensions – an Appeal for Reform Brussels: ERT Federal Deposit Insurance Corporation (FDIC) (2000) History of the Eighties – Lessons for the Future Volume I: An Examination of the Banking Crises of the 1980s and Early 1990s Available from: http://www.fdic.gov/bank/historical/history/ [Accessed June 2005] German Banking Act (Gesetz über das Kreditwesen) Revised version of the Sixth Act Amending the Banking Act (2002) Frankfurt: Deutsche Bundesbank Giovannini Group (2001) Cross-Border Clearing and Settlement Arrangements in the European Union Brussels: European Commission Giovannini Group (2003) Second Report on EU Clearing and Settlement Arrangements Brussels: European Commission Group of Ten (2001) Report on Consolidation in the Financial Sector BIS, IMF, OECD HM Treasury & Financial Services Authority (2003) Consultation Paper 204: Financial Groups London: HM Treasury International Labour Organization (2001) The Employment Impact of Mergers and Acquisitions in the Banking and Financial Services Sector Geneva: International Labour Office International Monetary Fund (2003a) IMF Country Report No 03/46 – United Kingdom: Financial System Stability Assessment Washington: International Monetary Fund International Monetary Fund (2003b) IMF Country Report No 03/343 – Germany: Financial System Stability Assessment Washington: International Monetary Fund Review Committee on Banking Services Law (1988) Banking Services: Law and Practice Report by the Review Committee London: HM Treasury Review of Banking Services in the UK (2000) Better Banking, More Competition London: HM Treasury, 20 March 2000 World Bank (2001) Finance for Growth: Policy Choices in a Volatile World Oxford: Oxford University Press Bibliography & Sources 285 Interviews, speeches and presentations Blessing, M (2004) Presentation – Growth strategy in retail banking Frankfurt: Commerzbank, 22 September 2004 Bundesverband deutscher Banken (2003) Pressekonferenz anlässlich der Vorstandssitzung des Bundesverbandes deutscher Banken, 27 November 2003, Dr Rolf-E Breuer, Präsident des Bundesverbandes deutscher Banken Berlin: Bundesverband Deutscher Banken Cruickshank, D (2000) Speech on the review into competition and UK banking London: HM Treasury/British Government Davies, H (1999) Profitability and competition in UK banking London: Speech at the Chartered Institute of Bankers Westminster lecture, 15 November 1999 Hockmann, H (2000) Presentation held at Fortis Bank Investment Symposium 2000: How the European banks position themselves as global consolidated players? Commerzbank’s view Noordwijk: Commerzbank, April 2000 Interview Barclays senior management London: 14 October 2005 Interview Deutsche Bank senior management Frankfurt: 26 October 2005 Interview Dresdner Bank senior management Frankfurt: 15 February 2007 Interview financial journalist based in Munich Munich: December 2006 Interview HSBC investor relations (2006) Investor relations department HSBC Holdings, London: April 2006 Interview HVB senior management Munich: December 2006 Interview Lloyds TSB senior management Frankfurt: 22 November 2005 Interview RBS senior management Frankfurt: 18 July 2006 Monti, M (2002) Latest developments in EU competition policy Speech in the framework of the Walter-Eucken-Lectures series Freiburg, 11 March 2002 Avaialible from: www.walter-eucken-institut.de/veranstaltungen.htm#frueherevortraege [Accessed 11 November 2002] Solans E.D (2002) European financial integration and stability Speech delivered at the conference organised by the Association of Foreign Bank Representatives in Germany, Frankfurt am Main, 17 September 2002 Van Miert, K (1998) EU Competition Policy in the Banking Sector Speech by EU Commissioner Van Miert to the foreign bankers in the Belgian Bankers’ Association, Brussels, 22 September 1998 Weber, M (2003) Presentation: Bankenstandort Deutschland 30 October 2003, Zurich: Bundesverbandes deutscher Banken This page intentionally left blank Index Abbey Life, 183, 186, 188 Abbey National, 73, 79, 189, 190, 225 Ackermann, Josef, 96, 99, 101, 103, 109–11 Advance Bank, 170, 207 agent-structure, 219 Allgemeine Deutsche InvestmentGesellschaft (Adig), 135–6, 168 alliance, 40, 62, 154, 232 Allianz, 13, 46, 104, 162, 175, 198, 204–17 AMB, 137 Ansoff, Igor, 21, 27 army, 23–4 asset-liability management, 44–8, 55, 95, 204 Association of German Banks (Bundesverband Deutscher Banken), 72 Automated Teller Machines (ATM), 44, 73, 76 AXA, 104 bancassurance, 12–13, 42, 46, 54, 103, 104, 122, 132, 137, 145, 184–8, 205, 226 Banco de Valladolid, 147 Banco Santander, 79, 129, 225 Banco Zaragozano, 153, 161 Bank Austria, 165, 171–7 Bank Metzler, 30 Bank of England, 10–12, 67, 112–14 Bank Rozwoju Eksportu (BRE-Bank), 133, 139 bank run, 1, Bankers Trust, 99–101, 203, 227 banking centre, 26, 36, 40, 137, 207 Banque Nationale de Paris (BNP), 198 Banque Worms, 104 Barclaycard, 154 Barclays, 7, 43, 76, 114, 124, 145–61, 189, 221, 222, 226–39, 244 Barclays de Zoete Wedd (BZW), 76, 149–51, 159–60 Barrett, Matthew, 146, 147, 153–4, 157, 159–61, 222 barriers to entry, 37, 38–43, 195, 226, 228 Bayerische Hypotheken- und WechselBank (“Hypo-Bank” or just “Hypo”), see HVB Bayerische Vereinsbank (“Vereinsbank”), see HVB Bernd Fahrholz, 198 Bernhard Walter, 198 Big Bang, 12, 76, 117, 148–9, 184–5, 237 Black Horse Financial Services, 188 Bond, John, 114, 118, 126 Boston Consulting Group, 33 Breuer, Rolf-Ernst, 96, 100–7, 110–11 Brown Brothers Harriman, 118 Building Societies, 9, 12, 73, 76, 187, 191 Building Societies Act, 12, 73, 76, 187 Bundesanstalt für Finanzdienstleistungsaufsicht (Bafin), 13–14, 71 Bundesbank, 13, 67, 75 business strategy, 2, 6, 21, 34, 238 Butt Philip, Alan, 11, 68, 71 Buxton, Andrew, 146, 159–60, 234 capital adequacy, 13, 15, 175, 179 Capital Adequacy Directive, 13 capital asset pricing model (CAPM), 109 Chandler, Alfred, 5, 21, 27, 32 Cheltenham & Gloucester (C&G), 186–93 Chinese army, 23 Churchill Insurance Group, 81, 86 Citizens Financial Group, 79–80, 83–5, 90 Clausewitz, Carl von, 5, 22–8, 240 cluster risk, 39, 105, 106, 110, 156, 165, 174, 196, 222 Comdirect, 137–8, 143 Commerz International Capital Management (CICM), 135 Commerzbank, 7, 128–45, 163, 168, 214, 221–2, 226–38 287 9780230_220485_08_ind.indd 287 3/9/2009 7:39:24 PM 288 Index competition, 18, 35–7, 40, 42–3, 52–4, 57–8, 63, 69, 71, 73, 76–8, 110, 112, 145, 148, 159, 188–91, 195, 229–30 competition analysis, 35–6 Competition Commission, 188–9 competitiveness, 38 concept of fit, 57 consumer finance, 86, 116, 120, 121, 125, 127 consumer surplus, 36 cooperative banks, 37, 67–73, 110, 227, 229, 234, 241 co-opetition, 20, 61–4 core competence, 27, 35, 46, 51, 55–6, 64, 99, 166–8 corporate finance, 44, 46, 50, 63, 98, 134, 149, 184, 185, 202, 216 corporate governance, 130, 181, 236 corporate strategy, 5–6, 18, 19–64, 94, 96, 98, 101, 127, 144, 195, 219–24, 234–40 cost income ratio (CIR), 41, 42, 44, 89, 105–6, 110, 123, 135–6, 140, 144, 156–7, 172, 180, 187, 190, 208, 211, 214, 219, 220, 222, 224, 228, 229 cost leadership, 51–2 cost of capital, 37, 42, 53, 141, 214 credit card business, 38, 40, 44, 81, 86, 154, 189 Credit Commercial de France (CCF), 82, 115, 119–21, 227, 239 Credit Lyonnais, 104, 129, 153, 161 Credit Suisse Group, 26 Creditanstalt, 172 critical rationalism, 28 Crocker National of California, 113 Cruickshank, Don, 77 Cruickshank Report, 77 Daniels, Eric, 182, 185–6 Davies, Howard, 77 DBV-Winterthur, 137 demarcation, 25, 29 demutualise, 73, 187 deposit insurance, 182 deregulation, 37, 58, 76, 96, 110 Deutsche Bank, 7, 24, 53, 70, 95–112, 129, 130, 132, 139, 161–3, 166, 198, 202–3, 208, 211–38 Deutsche Hyp, 214 Deutsche Orientbank (German Orient Bank), 197 Deutscher Herold, 102 Deutsch-Südamerikanische Bank (German South American Bank), 197 Direct Line, 81, 86–7, 90, 94, 235 Direktanlagebank, 170 diseconomies of scale, 38 disintermediation, 2, 15, 17, 37, 45, 46, 50, 54, 71, 72, 93, 96, 97, 98, 110, 112, 117, 120, 125, 127, 148, 150, 158, 220, 227, 230, 237 distribution, 36, 38, 41–53, 84–6, 100, 102, 104, 120, 134–8, 154–6, 173, 188, 189, 198, 205–8, 238, 244 Dresdner Bank, 7, 13, 46, 65, 129, 130, 132, 139, 161, 163, 166, 170, 196–217, 221–3, 226–38 Dresdner Investment Trust (dit), 205 Drucker, Peter F., 21, 27 East Germany, 67, 163, 201 Eastern Europe, 130, 133, 163, 165–6, 169–70, 172, 180, 198 economic value added (EVA), 53, 60, 214 economies of scale, 4, 17, 38–41, 52–3, 84, 123, 156, 191, 228 economies of scope, 17, 39–41, 52, 54, 237 Ellwood, Peter, 182, 185, 188–90 Eurohypo, 210, 214 European integration, 65, 78, 215, 240 European Monetary Union (EMU), 150 European Retail Banking Group, 152 Evolvebank, 189 Financial Services Authority (FSA), 12–14, 75, 77, 83, 192 financial system, 1–6, 8–9, 18, 35, 60, 63–4, 65, 70–2, 77, 218–19, 234, 236, 239–43 First Direct, 114, 120 five forces, 5, 20, 35–7, 47, 59, 61, 225, 240 Foreign & Colonial Management (F&C), 168–9 France, 82, 83, 95, 103–4, 115, 121, 138, 147, 153, 161, 170, 189, 227, 239 Index 289 game theory, 28, 35, 62 Gause’s Principle of Competitive Exclusion, 33 German reunification, 65, 67, 130, 169, 197, 199, 201 Giddens, Anthony, 4–5, 28, 61, 218, 225, 239–40 Glass-Steagall Act, 10, 46, 100 globalisation, 37, 65, 195, 216, 223, 237–8 Goodwin, Fred, 79, 86, 88 government policy, 42 Gramm-Leach-Bliley Act, 100 Gutmann, Eugen, 196–7 Hamel, Gary & Prahalad, Coimbatore Krishnarao, 20–1, 35, 46, 55–7, 64 Handelsgesetzbuch (HGB), 97 Herrhausen, Alfred, 96 Hill Samuel, 171, 185–6 Holzmann, 107 Hongkong and Shanghai Banking Corporation (HSBC), 7, 43, 45, 112–28, 180, 185–6, 189, 220–2, 226–35, 238 housebank principle (HausbankenPrinzip), 71 Household International, 115–16, 119, 121, 125, 127, 227 HSBC, 7, 43, 45, 112–28, 180, 185, 186, 189, 220–2, 226–30, 232–3, 235, 238 hubris, 39, 209, 237 HVB, 7, 161–81, 222–3, 226–30, 232, 233, 235, 236, 238 hybrid capital, 177, 178, 213 Hypo Real Estate, 166, 175–7 Ibbs, Sir Robin, 182 incrementalism, 56 independent financial advisors (IFA), 45, 154 industrial organisation economics, 20, 59 information technology, 17, 39, 42, 52, 53, 140, 152, 156, 159, 196 ING, 42, 104, 226 Institutional Restructuring Unit (IRU), 204, 210 insurance, 8, 9, 13, 14, 26, 44, 45, 46, 54, 80, 81, 84–7, 90, 92, 102, 121–2, 125, 132, 137, 145, 155, 182, 186, 188, 198, 201, 205, 208, 226, 232, 235 interdependence, 4, 28, 31, 35, 47, 55, 218–19, 239–41 intermediation approach, 47–8, 55 International Accounting Standards (IAS), 97 International Financial Reporting Standards (IFRS), 97, 241 International Monetary Fund (IMF), 66, 67, 72, 77, 78 James Capel & Co, 117–19 James D Wolfensohn, 99 Jomini, Antoine-Henri, 24–5 Jupiter International, 135 Kleinwort Benson, 166, 199, 202–3, 205, 211, 216, 227 Klöckner-Humboldt-Deutz, 107 Kohlhaussen, Martin, 130, 143, 145 Kopper, Hilmar, 96, 98–100, 103, 110–11 Korea Exchange Bank (KEB), 133–4 Kreditwesengesetz (KWG), 12, 13, 175 learning school, 20, 55 Legal & General, 155 Leonberger Bausparkasse, 137 Liddell Hart, Basil Henry, 23, 25 life insurance, 46, 54, 102, 122, 137, 155, 188 Lloyd, Sampson, 181 Lloyds Bank, see Lloyds TSB Lloyds TSB, 7, 43, 46, 94, 124, 181–96, 220, 221, 223, 226, 228–35, 239 London Stock Exchange (LSE), 11–12, 76 Long Term Capital Management (LTCM), 156, 209 Machiavelli, Niccolo, 23 Martini, Eberhard, 163 Mathewson, George, 79 Merck Finck, 147, 152 mergers and acquisitions, 18, 39, 69, 98, 134, 181, 202, 227, 244 Metallgesellschaft, 107 micro- and macrostructure, 31, 60 Middleton, Peter, 146 290 Index Midland Bank, 112–20, 126–7, 185–6, 220, 235, 237 military strategy, 21–2, 32 Mintzberg, Henry, 3, 5, 19–34, 55–6, 59, 62–3, 167, 224, 240 Mittelstand, 43, 133–4, 141, 144–5, 175, 201 M.M Warburg, 128 monetary policy, 67 monetary transmission, 67 monopolist, 35 Montgomery Asset Management, 136 Morgan Grenfell, 96–101, 166, 202–3 Müller, Klaus-Peter, 130, 141, 145 Munich Re, 176 Napoleon, 22, 24 National Bank of New Zealand, 182 National Westminster (NatWest), 78–95, 99, 145, 220, 227, 237, 239 Nazi Germany, 95, 129, 162, 197 Non-Deposit-Taking Institutions (NDTI), 9–10, 15 Norisbank, 171, 175 offshore banking, 26, 52, 87 online banking, 42, 44, 45, 52, 138, 154, 189, 207 open architecture, 45, 137, 169 pension funds, 44, 119, 205 Pitman, Brian, 182–95, 223, 234 planning, 21, 24, 28–9, 32, 34, 37, 146, 208, 224 policy analysis, 20, 55 policy-making, 55 political, 3, 6, 7, 19, 22–7, 32, 35, 40, 43, 56, 65, 68, 72, 87, 128, 160, 195, 204 politics, 22, 32, 63 Popper, Karl, 28–30, 55–6 Porter, Michael, 5, 19, 20, 21, 23, 26, 27, 31–64, 224–5, 228, 240 positioning, 3, 20, 21, 23, 31–3, 34, 36, 42, 58, 59, 63, 98, 224, 240 power, 6, 11, 22, 25, 30, 36, 39, 47, 49, 50, 54, 55, 59–64, 77, 95, 96, 132, 162, 230, 235, 238, 240 principal-agent problem, 71, 201 producer surplus, 36 product differentiation, 5, 41–3, 50–1, 55, 57 production approach, 47–8 Purves, William, 114, 117 Quaker families, 145 Quinton, John, 146 Rampl, Dieter, 163, 166, 171, 177 rating agencies, 49, 94, 177, 179 RCM, 205 reinsurance, 26, 54, 102, 122 Republic National Bank of New York, 115, 227 repurchase agreements, 142 resource-based view, 20, 21, 36, 46, 58, 59, 60 Rheinhyp, 132, 140, 142 risk diversification, 46, 180, 222, 242 risk management, 54–5, 72, 83, 88, 90, 92, 105, 116, 122, 123, 124, 134, 139, 141, 146, 148, 149, 152, 155, 159, 161, 172, 174, 180, 181, 190, 203, 204, 208, 209, 210, 224, 225, 227, 230, 231, 232, 236, 237, 241, 242 Risk-Weighted Assets (RWA), 35, 81, 94, 109, 210, 214 Röller, Wolfgang, 198 Royal Bank of Scotland (RBS), 7, 65, 78–95, 113, 189, 220, 221, 224, 226–32, 235–6, 239, 244 Samuel Montagu, 117–18, 185 Sarrazin, Jürgen, 198, 202–3, 213 savings banks, 37, 42–3, 68–9, 227, 229, 241 Schmidt, Albrecht, 161–81, 222 Schmidt, Reinhard, 39, 63–4, 240 Schröder Münchmeyer Hengst (SMH), 182, 185 Scottish Widows, 186, 188, 192 Scudder Investment, 102 shareholder value, 37–8, 70, 126, 182, 191, 196, 215, 223, 233–8 signalling, Single European Market, 2–3, 69, 96, 130, 182, 218 SME, 69, 71, 82, 110–11, 133, 221, 224, 228, 238 specialisation, 39, 53–4 Index 291 stakeholder value, 37, 70, 233–5 state-owned banks, 234 Stephen Green, 114, 119 strategic intent, 56–7 structure-conduct-performance (SCP), 5, 240 substitute, 44–6, 59 Sun Tzu, 22–5, 61, 224 supervisory board, 71, 96, 100, 111, 130, 163, 181, 198, 217, 234, 236 Sutherland, Thomas, 112 switching costs, 41, 47, 49, 51 Switzerland, 26, 83, 95, 114, 170 systemic risk, 243 Tacticus, Aeneas, 22 Taylor, John, 181 Taylor, Martin, 146–61, 222 Tchibo, 86 technology, 17, 39, 40, 42, 46, 51–3, 57, 76, 85–6, 140, 152, 154, 156, 159, 196 Tesco, 85 transaction services, 15, 17, 45–6, 54–5, 58, 98, 109, 111, 144, 200, 203, 219, 237 transformation services, 17, 45–7, 49–50, 55, 58, 173, 181 Trinkaus & Burkhardt, 113 UBS, 26 Unicredit, 161, 163, 180, 238 universal banking, 39, 70–1, 96, 105, 122, 199, 203 Vereinsbank, 161–81, 207, 222, 227 volatility, 26, 54, 81, 109–10, 124, 127, 191, 193, 225 Walter, Herbert, 198, 208 Wasserstein, Bruce, 203 Wasserstein Perella, 199, 203, 211, 235 Wells Fargo Nikko Investment Advisors, 149, 151 Whitson, Keith, 114 Wille, Theodor, 128 Woolwich, 154–5, 158, 161, 227 Younger, George (Viscount Younger of Leckie), 79 Zurich Financial Services Group (ZFS), 102 ... them the British and German Banking Strategies Figure 1.1 German Banks 1993 British Banks 1993 German Banks 2003 British Banks 2003 Longitudinal and cross-country comparison Second Banking 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