Definition

Financial regulation has evolved along two dimensions: center/periphery and for-profit/non-profit. Their intersection generates four banking sectors (see table 2.2, p.30).

The center bank category includes all commercial banks headquartered in the financial center(s), whether joint stock or partnership, whether nationalized by the central government or in private ownership. The central bank is not included. Joint-stock banks, with the central bank as primus inter pares, were created by private bankers, usually in the second half of the nineteenth century, with central government approval in the form of a charter. Many of these banks were nationalized after World War II and privatized in the last two decades of the twentieth century. Strictly speaking, it is incorrect to label these banks “for-profit” during the period when they were owned by the state, since they were not distributing dividends. But I kept this notation for convenience, because state ownership had little or no implication for the way the banks were run. Their directors enjoyed enough autonomy to pursue market-oriented strategies. Nationalization merely aimed at redistributing bank profits, not at reallocating bank credit. The private banks (a residual category, since most of them were incorporated as joint-stock banks in the nineteenth century) are also included in this category.

The local non-profit bank category includes savings banks, mortgage banks, credit cooperatives, and two categories of credit banks operated by local governments – the German Landesbanken and Swiss Kantonal banks.