In her historical account of banking in the United States The Politics of Banking (2001), Susan Hoffmann argues that depository institutions are the product of policy choices. Hoffmann, along with work by comparative political economists and students of public banking resist the temptation to view banks as generic economic actors that arise naturally to serve the demands of markets. There is nothing natural or inevitable about credit institutions. Instead, Hoffmann and others demonstrate that credit institutions are the result of political choices over the entity's institutional features, and its mission and purpose (Hackethal et al. 2006; Butzbach 2008).

This chapter draws on Hoffmann's insights to introduce Germany's Sparkassen. The chapter is organized around a set of questions that offer a primer on Germany's public savings banks: Where do Sparkassen originate? What sets them apart from other credit institutions? Where do they fit within Germany's banking system and what is their business model? And finally, how are public savings banks organized and governed? The chapter begins with a historical account of the origins of Sparkassen's mission. A second section outlines the institutional features that distinguish Sparkassen from other banks. A third section discusses where Sparkassen fit within the country's network of public banking. And finally, the chapter considers where Sparkassen fit within Germany's federal banking system.

A mission forged in crisis

Studies of German industrialization often focus on the role large banks played in enabling Germany to leapfrog other advanced economies in the nineteenth and early twentieth century (Gerschenkron 1989; Shonfield 1969). Scholars attribute to Germany's large private universal banks the leading role in the development of the country's industry. However, smaller credit institutions such as cooperatives and public savings banks also played an essential role in Germany's transition from an agrarian to industrial capitalism. It is a role that continues to reverberate in today's economy perhaps even more so than the impact of big banks.

Prior to 1871, Germany was a group of independent states rather than a single country. Banking laws and related regulatory issues were left to the individual states unless specifically negotiated through treaties.