With a firm grounding in the background and history of Germany's public savings banks, this chapter turns to the central puzzle of the book: What makes Germany's Sparkassen such an anomaly in the world of public savings banks? In other European countries as well as the United States local savings banks were either transformed, privatized, eliminated or consolidated to the point that they were no longer recognizable. This chapter presents the case for why Germany's Sparkassen’ existence and performance are surprising; why their resilience is a puzzle worth researching.

The first section discusses how during the pre-crisis period academics and practitioners predicted and, in many cases, advocated for the weakening of Germany's bank-based model of financing. This included the elimination of what were portrayed to be antiquated and obsolete public savings banks. The epigraph by a supervisory board member at the beginning of the chapter captures the sentiment. A second section discusses the external and domestic challenges faced by Sparkassen in the aftermath of the financial crisis. Drawing on banking and economic literature, the section argues that by most accounts Germany's Sparkassen should be an endangered species. A third section of the chapter turns to their performance since the financial crisis to illustrate how Sparkassen defy expectations: that despite expectations to the contrary Sparkassen remain the most profitable and the most efficient financial institutions in Germany.

Pre-financial crisis consensus: Sparkassen are past their prime

In 2004, three years before the financial crisis hit, Manfred Weber, director of the Association of German Banks – the largest trade group for Germany's 2,500 credit institutions – pleaded for the privatization of Germany's public savings banks, “Local governments’ bank accounts are empty as they face large deficits. City and county officials are right to ask whether they should sell their savings bank and invest the funds more prudently” (“Konsolidierung: 1000 Banken werden sterben” 2004).