1 ARE GERMAN BANKS DIFFERENT? 1998, Small Business Economics, 10(2): 79-91.

In recent years there has been a vigorous revival of the long-standing debate about the "uniqueness " of German banks. To date little consensus has been reached; while some see few differences between the role of banks in Germany and in other countries, others claim that universal banks ' equity shareholdings in and nomination of representatives to the boards of nonfinancial firms are the key institutional features driving the rest of the "German model " of long-term investment in high-quality, internationally competitive manufacturing. This article argues that the uniqueness of the German banking system lies (1) in its unusually high capacity to provide industrial finance in the form of long-term debt capital, and (2) in its avoidance of the "speculative boom-credit crunch " cycle experienced by almost every other advanced industrialized country in the 1980s and early 1990s. These two key characteristics are attributable to a regulatory framework which involves strict prudential regulation, access to long-term refinancing sources, and a federalist form of corporatism. Furthermore, the behavior of German banks must be analyzed within a broader institutional system of economic governance which includes corporatist labor market institutions and a relatively large and modern SME sector