The period from 1960 until the present is characterized by a strengthening of core–periphery tensions in finance. Deregulators are removing the protective measures that were established in the wake of the Great Depression; they are also scaling back the state credit sector, which in many countries reached unprecedented proportions in the immediate postwar period.

However thorough and ubiquitous, the present trend is unlikely to bring about the convergence of OECD banking systems on the money-center bank model; it is of a more limited character. Deregulation has merely restored the degree of competition that existed in pre-Depression days. The center banks have managed to regain a sectoral dominance in countries where they were dominant before World War I – in centralized countries. In contrast, center banks have remained a junior partner in countries where the savings and cooperative banks constituted the dominant sector – in decentralized countries. Certainly, concentration has increased across countries, but concentration has taken place only within sectors, not across them.

The interwar and early postwar decades

Ongoing financial deregulation has consisted in the removal of four decades of regulatory layers. These layers took two forms: (1) the promotion of state credit and (2) the regulation of banking competition.

State credit

State credit is the allocation of credit by the central government through so-called specialized credit banks or state credit banks, which finance their needs by issuing state-guaranteed bonds. State credit banks are different from postal (and other state-run) savings banks.