How far economic development is shaped by non-economic, and specifically by institutional, factors has been one of the perennial questions in economic history. It arises particularly acutely in the case of banking history. What peculiarities in economic structure are generated by the particular institutional features of a system of financial intermediation? Does the way banks are organized affect their ability to deal with the rest of the economy? Some analysts attempt to go beyond an institutional examination, and examine the broader issue of how the social circumstances and the intellectual horizons of a banking community affect the rationality of its collective decisions.

Issues such as these have always been at the heart of investigations of Germany's banking system. This paper considers how and why the impact of economic institutions changed in the aftermath of the First World War.

Alexander Gerschenkron famously related the institutional position of banks to relative economic backwardness and particularly to capital scarcity. The Gerschenkronian tradition accords to credit banks the central role in Germany's economic development, since after the mid nineteenth century they mobilized large sums for industrialization that would otherwise have been unforthcoming. They took a sustained interest in companies by means of the Kontokorrent (loans through overdrafts on current account). When the capital market appeared receptive, they managed the issuing of shares and flotation of companies on the Stock Exchange; and they used their influence on Supervisory Boards (Aufsichtsräte) to influence firms' policies and especially to regulate competition and promote cartels and mergers.