The Significance of German Savings Banks in regional Structural and Cohesion Policy: Can they avoid regional downward Spirals? Stefan Gärtner Institute for Work and Technology Munscheidstr 14, 45886 Gelsenkirchen, Germany email: gaertner@iat.eu Abstract: This paper deals with savings banks in Germany (Sparkassen) in the context of regional structural and cohesion policy, as well from a theoretical as an empirical point of view What benefits the savings banks provides will be discussed, on the one hand in terms of growth agenda, and on the other hand in terms of cohesion policy While making research on this topic, the question arises if the regionally-limited savings banks are able to be as economically successful in poorer regions as in prosperous ones This leads to the question if savings banks can outrun ‘downward spirals’ in less developed regions? Content Introduction 2 Regional Structural Policy between growth agenda and cohesion ? The Theoretical Relevance of savings banks 3.1 The Function of Banks: does space matter? 10 3.2 Banks and Capital Mobility and their Effects on Regional Development 13 Regional Banks and Lock-In Effect: Is there any weakness of strong ties? 15 4.1 Methodical approach and research design 17 4.2 Empirical Results 19 Regions and their Savings Banks: A qualitative comparison 25 Some Final Remarks 28 1 INTRODUCTION Traditionally the objective of European as well as German cohesion and regional structural policy, is to develop structurally weak regions in order to reduce regional disparities Therefore huge amounts of public money have been invested in poorer regions in the past, for instance by subsidising inward investment Lasting weak rates of growth, persisting high unemployment rates, a shrinking population, and windfall gains, as well as only short-term results of company recruitment pose the question if such a policy is still reasonable Therefore in recent years a variety of different concepts and ideas for regional development have been worked out which emphasize the regional or local potentials, instead of promoting company recruitment into poorer regions These new approaches are well accepted by regional economic scientists, and also increasingly by regional, national and European policy-makers The concept even found its way into cohesion policy in order to support disadvantaged regions by strengthening or promoting ‘clusters’ – which are mostly not located in the structurally weaker regions In consequence, public money does not always go to the poorest regions any longer However, trying to develop underdeveloped regions through subsidising inward investment - which seems to be less successful in the long-run - is just as inappropriate as a regional policy only orientated towards growth Therefore a structural and cohesion policy with an orientation to growth and regional balance is needed: on the one hand, growth potentials should be promoted where they exist; on the other hand, structurally weak regions should receive special help in order to enable the participation in, and the fostering of, economic development For both, the growth agenda as well as the aim of cohesion, regionally or locally interested institutions and persons are needed that are aware of the local economy and have an inherent interest in the development of the region Germany has a unique system of decentralized public savings banks limited to the regional level by public law This means that the reinvestment of the accounted savings (e.g savings books) has to take place in each bank’s own area – mostly cities or ‘Kreise’ (similar to the counties in Anglo-Saxon countries) This stabilizes the economic development especially in weaker regions, due to the fact that they are reducing the drain of capital from the weaker into the richer regions Thus banks could play a vital role in regional economic development as well in prosperous as in poor regions But concerning the latter, the question arises if the regionally-limited German savings banks are able to be sufficiently successful in weak regions There could be a danger that the regional ties of savings bank lead to negative effects in the context of a balanced regional development This leads to the question whether savings banks are locked in ‘downward spirals’ in weak regions or, if they are - due to less competition in these regions for instance - as successful in poor as in prosperous regions In order to be able to judge the importance of saving banks in the context of the structural and cohesion policy, the next chapter will discuss structural/cohesion policy in more detail Chapter deals with the significance of savings banks in regional and bank theories Meanwhile chapter and provide the empirical part of the paper Chapter has a quantitative character by inspecting the correlation between the economic success of regions and savings banks How German savings banks act in regions is the question in chapter 5, in which four savings banks and their areas are investigated The paper will close with some final remarks in chapter REGIONAL STRUCTURAL POLICY BETWEEN GROWTH AGENDA AND COHESION ? Cohesion, or rather regional structural policy in Germany, is a multi-level-policy, carried out at European, national and regional levels (federal states), as well as by subregional and local bodies The different levels are shown in figure At the spatial higher levels these policies are traditionally motivated by the objective of reducing regional disparities, like the cohesion policy of the EU (top-down-policy) But in addition, all regions - even the prosperous ones - have, at the sub-regional level (cities or ‘Kreise’), their own individual economic development policies to promote local economy and to supply the region with workplaces, taxes etc (bottom-up-policy) Fig 1: Levels of regional policy EU, National state, Federal state… Regional Policy / Regional Cohesion and Structural Policy (top-down) Redistribution of Resources Common aims Divergent aims Improvement of own location conditions Location Policies, e.g Communal Business Development (bottom up) Cities and ‘Kreise’ ‘Kreise’ or cities wishing to participate in structural/cohesion programs of the higher bodies (federal, national or EU) are obliged to fulfil the guidelines required by these higher bodies A new orientation of cohesion policy more strongly directed towards growth is taking place both in the EU and in Germany (and in many other OECD-Countries) at the federal and regional levels The European cohesion policy, which traditionally follows the aim of reducing regional disparities, is starting to shift from helping the poorest regions to supporting regional strengths These policies place “much more stress on the links between cohesion and the Lisbon agenda, arguing ( ) that promoting regional competitiveness will boost the growth potential of the EU economy as a whole” (Bachtler/Wishlade, 2004: 12) Bachtler and Wishlade expect, that “there is a potential conflict between the objectives of competitiveness and cohesion” (2004: 50) In earlier times the main preconditions for taking part in structural/cohesion programs have been that regions possess a special grade of economic weakness A shift in regional structural or cohesion policy to the ‘strengthen the strength’ approach modified the requirements It is more and more common that these programs enhance endogenous competencies and economic clusters These lead to the consequence that not only the poorest regions get aid money but also the regions with special strengths, in other words: the poorest regions are getting a smaller piece of the cake (Hübler 2005, Rehfeld 1999) The common ideas shared by regional researchers promoting these policies are that concentration and specialisation of economic activities in a spatial sense will induce advantages for the single regions as well as for the whole national economy as illustrated in the following textbox Concentration and specialisation of economic activities in modern regional development concepts: A case of uneven regional development? More recent approaches, namely the cluster approach, are directed towards locally available competences and potentials: everyone knows about the local concentration of businesses or small workshops in the old parts of European or Middle Eastern cities The spice markets in Istanbul, the textile markets in Montmartre or the craft shops in the old town of Bucharest can be mentioned here Thus, these represent local concentrations of economic activities, a "geographical cluster'' in the area The essential advantage is that customers find a comprehensive geographically concentrated choice; a place frequented by specific suppliers with a corresponding infrastructure and the businesses are bound by a certain knowledge network, and so possess specific information The basic principles of such so-called clusters (e.g Porter 1993, 1999, Rehfeld 1999) are of course founded on advantages, and the system has been further developed and has its roots in different regional economic theories Regional economics state, that concentration and specialisation are requirements for growth From an overall economic point of view such an approach could bring advantages: But seen from the single regions perspective, one has to take into consideration that regions can mostly benefit from these approaches where internationally competitive potential has reached a critical mass, and components of a corresponding value-creating chain are located These conditions are mostly fulfilled in advanced regions As already mentioned in the introduction, it is necessary to have a policy orientated towards growth potentials as well as to develop the poorest regions Due to the fact that such a policy which focuses on the endogenous potentials needs regional or local support In this context a closer look at the specific German system of public savings banks is of interest as they are deeply involved in local and regional economy They are not only hidden champions, because of their knowledge of regional economy and of the supply of financial services, they also spend the regional savings only in the region, and therefore reduce capital drains from the poorer to the prosperous regions (back-wash effect) The role of local banks in regional development has seldom been researched in spite of the fact that it is known that a deficient capital supply can be a bottleneck of regional development (Chick/Dow 1988: 220) If banks or financial intermediaries are missing in peripheral or structurally weak regions the corporations cannot be as successful as in productive areas: This can perpetuate a cumulative process, in which fewer credits or funds means slower growth in the periphery with the consequence that the banks withdraw from these regions further (Klagge/Martin 2005, Dybe 2003, Dow 1999, Chick/ Dow 1988, Myrdal 1959) In such cumulative process the banking system may reinforce a core-periphery structure In the case of Germany the savings banks are of special interest because of their ubiquitous existence and their publicly legal form This will be explained in more detail in the following THE THEORETICAL RELEVANCE OF SAVINGS BANKS German savings banks are legal public institutions with a long tradition and have developed from the philanthropic necessity to promote the concept of saving among the poorer population into regionally orientated general banks As legal public institutions they are bound to their responsible body, which is generally a local or municipal authority or specific-purpose committee They fulfil a variety of tasks which can be summarized in the concept: of ‘public duty’ The regional principle is a fundamental rule which is to ensure that the public duty is met Loans may be allocated to institutions, businesses and private persons only in the region and, branch offices may also only be opened in their own regions The objective is that money saved in the region should primarily be invested to promote the local economy and local population Although savings banks are indeed locally independent, however, they are at the same time linked together as a kind of local system supplier in a complex financial group based on voluntary principle, interconnected assets, economic calculation and idealism This savings bank financial group efficiently provides specialized know-how and back office support (Gärtner 2003: 19 ff) The German savings bank financial group consists of savings banks, regional and federal associations, regional banks, public insurance groups etc., and amounts to about 670 businesses and approximately 390,000 employees with a turnover of 3.3 billion Euro (www.gutfuerdeutschland de/nachrichten/globaler_cham-pion.html) The division of labour between the institutions in this group enables even small savings banks to act both, cost-effectively by using ‘economies of scale’, and flexibly by reaching solutions on the spot The fact that savings banks in Germany are public in their legal form, nonmarketable, and therefore preventing the consolidation in the German banking market, are criticized by the EU Competition Commission as well as the German private banks (Sommerfeld 2005, Engerer/Schrooten 2004) These banks are unceasingly asking for the privatisation of public banks Legally doubtful is from their point of view above all the regional principle, which represents – according to their arguments - a regional cartel (Bundesverband deutscher Banken 2004) Against this background the question arises what benefit savings banks provide for the general public and in particular for regional development Is their existence justified? Savings banks have an important function as financial intermediaries They provide access to financial services for all sectors of the population and businesses in all regions Being near the customer and knowing the customer personally as well as the market is especially important for the commercial allocation of smaller loans Many further advantages of German savings banks are mentioned in the pertinent literature (Möllring 2003, Städte- und Gemeindebund Nordrheinwestfalen 2005) such as generating high local tax revenue, providing employment and training and supporting cultural and social activities in the region through sponsorships, donations and payment of foundation dividends The distribution of profits to local authorities and councils should not be ignored These benefits are positive side-effects which, however, would not give sufficient reasons for public authority activity in the banking sector Due to the fact, that the specific legal form of German savings banks can only be justified with respect to market failure in the financial sectors, e.g because of asynchronously distributed information, the focus will be on banking markets and their theoretical function (chapter 3.1) as well as the significance of local banks for the development of regions (chapter 3.2) 4.2 Empirical Results The first results of the interrelation between regional wealth and the 463 saving bank success, which can be drawn from Fig 3, are interesting and somewhat surprising The scatterplot shows the regional economic situation on the x-axis (measured with the described variables) and the banks economic success (measured here with return on equity, CIR and the operation profit) on the y-axis The poorer a regions is, the more the regional indicator (x-axis) increases, and the more successful a savings bank, the more the savings banks indicator (y-axis) increases The pattern of dots in the chart demonstrates at one glance a wide scatter, which says that there is no evidence for any relationship between regional prosperity and bank success Fig 3: Correlation between economic success of German savings banks and regional prosperity 1,2 Savings Banks Indikator 0,8 0,6 0,4 0,2 0 0,2 0,4 0,6 0,8 1,2 Regional Indikator Source: Statistische Ämter der Länder 2004 and 2005, BBR 2004 and 2005, own calculation 19 Furthermore, empirical data allowed the deduction that no ‘lock-in effects’ exist for regional banks and that these are as successful in poor regions as they are in wealthy ones The ‘line of best fit’ in the diagram - which slopes a bit from left to upper right suggests even a very small positive correlation This means here that savings banks are somewhat more successful in poor regions than in rich regions from a statistical point of view Against the background of the steep incline in regional prosperity and the heterogeneous economic structure between Western and Eastern German (former German Democratic Republic) regions the statistical population had to be split accordingly to get a more detailed picture and to validate the first results The correlation coefficients (Spearman) have been calculated for both West and East This coefficient indicates the direction and strength of linear relationships between two variables (here success of banks and regions) The coefficient can reach values between +1 in the case of an increasing relationship and -1 for a decreasing relationship The closer the coefficient is to +1 or -1, the stronger the correlation (Brosius 2002: 496ff, www.statsoft.com/textbook/stathome.html) Figure shows the result of the correlation analyses for West and East Germany A correlation coefficient between and +1 represents a positive statistical relation, indicating here that savings banks are more successful - respectively earning a higher interest margin - in poorer regions than in prosperous ones An exception is the CIR for which an inverse connexion occurs: The higher the values of the CIR, the less efficient a bank is working Accordingly, a positive coefficient indicates here that banks are less efficient in poorer regions 20 Fig 4: Table with Correlation Coefficients (Spearman) between the Regional Indicator and the economic success of Savings Banks Savings bank variables Regional Indicator West Germany East Germany return on equity before tax -0,04634 0,03136 CIR 0,07999 -0,22206 Operation of profit before estimation 0,06604 0,24276 Operation of profit after estimation 0,02573 0,01954 Interest margin 0,30716 0,23789 Source: Statistische Ämter der Länder 2004 and 2005, BBR 2004 and 2005, DSGV 2006 (extra analyse), own calculations) * Please note that statistical significance tests are unnecessary in this case due to the fact that statistical population (all savings banks and all regions in Germany) has been used As can be drawn from Figure the success of savings banks in West German cities and ‘Kreise’ is statistically marginally dependent on the regional economic situation of bank areas Depending on the variable observed, savings banks earn sometimes more or less profit in poorer regions than they in prosperous, but the correlation coefficient is marginal On the other hand the coefficient representing the relationship between regional wealth and interest margin of savings banks (last row in the table) is meaningful, due to the fact that a definitive correlation exists between weak regions and high interest margins of savings banks However, the results are in general more explicit for East Germany as shown in the next column in figure All coefficients show that savings banks in Eastern German cities and ‘Kreise’ are slightly more successful in weak than in prosperous regions Even though the most coefficients are low, the relation has become most apparent for the indicator “Operation of profit before estimation” Concerning the variable ‘Margin of interests’, savings banks in East German regions show dependencies - similar to the western savings banks: The structurally weaker the region, the higher the interest earned 21 Data interpretation could lead to the assumption that savings banks in weak East German regions are successful because of fewer investments in regional credit loans and higher investments at the international capital market (proprietary trading) If this assumption proved true - that savings banks would ration credit loans in order to make easier and eventual higher profit on the international capital market - their legitimation as public institutions would be in question But further analyses have shown that there are no such hints and therefore, no credit rationing of savings banks from a statistical point of view The correlation coefficients representing the relationship between regional wealth and the amount of credit loans are for East Germany very small, but positive (for details see Gärtner 2007), meaning that savings banks in weak East German regions deal in credits rather more than those in prosperous regions For both West and East Germany, the empirical results show that savings banks are at least equally successful in poor and structurally weak regions as in wealthy regions The fact that these results are based on the examination of the statistical population makes them stable and feasible, also in political discussion In summarising, the statistical data provides evidence that regional savings banks are able to avoid ‘downward spirals’ in weak regions and thus, are able to promote a balanced regional development Considering common thinking on the function of economy and banks, this is by no means self-evident 22 To understand the results - especially the fact that in weak East German regions savings banks are slightly more successful than in prosperous ones - it has to be acknowledged that East Germany is still characterised by a core-periphery structure, meaning that in particular the peripheral regions are economically undeveloped From the perspective of banks, these regions are less interesting in an economical sense, and thus, competition is low Moreover, it has to be taken into account that co-operative banks are less represented in the East of Germany The higher banking-profit realized in these regions derive indirectly from the incentives of these banks in establishing lending relationships Following modern banking theory, the meaning of good relationships between banks and customers has gained in importance (see chapter 3) “Long-term relationships between banks and firms may be an important instrument for counteracting informational asymmetries” (Harhoff/Körting 1998: 1318) If banks acting in highly competitive markets they not expect profits from a long-term customer-bank relationship, compensating short-term losses, they would not invest in the relationship Following this thought, less competitive regional markets therefore bear more incentives for local banks to invest in relationships and to finance even start-ups companies In general, loans to start-up companies, which involve higher risks and are quite work-intensive, are usually only worthwhile if a long-term customer relationship can be anticipated (Deutsche Bundesbank 2005: 106) The mode of functioning is shown in figure 23 Fig 5: Relationships in regional Banking Market: effects, social capital and regional market power Learning by Lending High power of regional markets Investing in Relationsships Especially relevant by small credit loans Enhancing of the profit Intertemporal margincompensation Konventional theories: Rents of Oligopoly Banks investing in bank-customer relationships in less competitive markets will in addition profit from learning effects This applies particularly to smaller credit engagements which are common for local or regional banks These regional information advantages lead in the long run to higher success of savings banks which will be amplified through their specific business model and affiliation in the savings bank financial group (see chapter 3) Of course savings Banks are also profiting from less competition in these regions, due to higher prices for financial service, for which the higher interest rates provide an indication 24 REGIONS AND THEIR SAVINGS BANKS: A QUALITATIVE COMPARISON This paper seeks to advance the idea that savings banks are important institutions for regional cohesion and structural policy Saving banks are sufficiently successful in structurally weak regions, as presented in the results of the empirical analysis Hence, they meet the precondition which enables them to support less favoured regions and to that effect they could be a promoter of a balanced regional development This means that the German system of savings banks has an inherent impact on developing endogenous potentials and stabilising weak regions Therewith, it has been proven that saving banks have the possibility to support regions, but the empirical analysis does not answer the question if they take this role in reality, and how they so Answering these questions requires qualitative analyses which of course could not be done for all 463 savings banks Instead, the example of four savings banks and their areas have been investigated Each of these savings banks is characterized by a specific type of region: Two are located in structurally weak and two in prosperous regions Furthermore, the spatial categories - ‘periphery’ and ‘core’ - have been used as a selective criterion Accordingly the following savings banks have been chosen for the qualitative analysis: The ‘Sparkasse Darmstadt’ represents a prosperous urban region characterised by intensive competition of banks (Frankfurt is nearby) and fast economic growth Likewise, the ‘Sparkasse Dortmund’ is located in a conurbation, but contrary to the latter, the region was densely industrialized in former times and is still dealing with structural economic change The ‘Kreissparkasse Biberach’ is located in a prosperous, but peripheral, region with a low unemployment rate and a growing population The fourth region - in which the ‘Sparkasse Altmark West’ is located, is 25 poor and peripheral The region is situated in the former ‘German Democratic Republic’, is sparsely populated and has no essential economic strengths Only savings banks which have been willing to take part in such a research could be examined Therefore, it should be taken into consideration that these banks surely represent ‘good practice’ The regions and savings banks have been examined by means of face-to-face interviews Executives of the banks were interviewed as were representatives of the municipal authorities responsible for local or regional economic development In addition banking and regional reports as well as data and the regional press were analysed so as to get a better insight into the regions and institutions Due to the volume of information collected for each case, it is not possible to present each study in this paper to its full extent Instead, the core results are summarised subsequently (see for detailed information Gärtner/Rehfeld 2007): Apparently savings banks are essential in economically underdeveloped and peripheral regions This comes to the fore above all in regions like ‘Altmark’ In such regions the bank function as supplier of financial services - in particular loans - to SMEs, is most important In addition savings banks play a key role in providing financial products to the population That savings banks are important institutions for economic development in weak regions - in which private banks have slimmed down their presence - is easy to comprehend However, they are also crucial in prosperous cities and conurbations, as in ‘Darmstadt’, in terms of supplying loans to SMEs which cannot finance themselves in the equity market, providing the poorer population with financial products and by being present in poorer districts of town Concerning the latter, the analysis shows that 26 saving banks could indeed be somewhat more innovative by adopting modern instruments like ‘micro lending’ Regarding the debate, if space plays role in banking markets - which has been discussed in chapter - the case studies show that space does matter in the customer-bank relationship Despite the fact that internet-banking is still gaining in importance, regional banks remain the key player in SMEs loan-financing The credit loan experts of the four saving banks pointed out, that savings banks still benefit from information advantages due to a good customer-bank relationship, and intensive knowledge about the region The decision to invest in companies is - according to these experts - always based on several face-to-face meetings, and is, at the end of the day, also a question of trust Moreover, the employees working for the municipal authorities emphasised the importance of having regional banks that make on the spot decisions: Regional savings banks - so their comments - have the competence for decentralised and timesaving decisions This is of importance in particular in the case of liquidity squeeze of local companies Private banks, on the other hand, because they are on the spot only with branches, are bound to their headquarters directives which cannot asses the local situation The savings banks examined show a clear readiness to finance start-up companies and to invest in work-intensive collection of information The reason behind this is, according to bank employees, that there is only a minor probability that private banks will take over these customers (start-ups) when they are successful Private banks have according the banks examined - withdrawn from this business segment in recent years 27 These qualitative results concerning the significance of customer-bank relationship confirms the findings of the statistical analyses done in the previous chapter Savings banks are not only supporting regional development due to their role as financial intermediaries, also their decentralized system of local branches is an important focal point in the context of small-scale retail development in structurally weaker city districts and also in rural villages This becomes apparent in the region of ‘Biberach’ and ‘Altmark’ Through their engagement in regional projects - like cluster activities or regional identity creation - their relevance goes far beyond the core of financial business activities A good example for this is ‘Dortmund’ where the ‘Sparkasse Dortmund’ supports the city in the structural change from a industrial to a knowledge intensive economic structure As the analyses of regional projects in which savings banks are involved, show, saving banks are able to adapt to regional development strategies SOME FINAL REMARKS Due to the lower credit volumes the allocation of credits to SMEs is on average not profitable, as long as long-term customer relationships and local knowledge not reduce the checking costs and high risks As has been outlined, German savings banks invest in such customer-bank relationship and are therefore able to finance these companies and help to close the gap in financing SMEs and start-up companies, even in disadvantaged regions Furthermore they ensure the access to financial services to all sectors of population and provide a high competition in the banking market 28 The role of German savings banks is above all meaningful in terms of the EU policy They are supporting successful regions in their efforts to develop their competitive strengths Therefore, the unique system of savings banks in Germany on the one hand tends to support the ‘Lisbon Agenda’ On the other hand it also contributes to the objective of ‘cohesion policy’ by reducing regional disparities The basis for a successful European society and economy is a vital and innovative regional life One of Europe’s strengths lies in the diversity of its regions In order to maintain or improve regional distinctions and identities, regional institutions with a strong commitment to their regions are needed German savings banks embrace this role, as shown in this paper Nevertheless, the potential for future improvement of savings banks should under no circumstances be ignored Thus, for example, they could more strongly implement new financing instruments common in other countries, such as venture capital, and also high risk small loan instruments (micro lending), especially in weak town districts Learning could be done also in reverse direction: The listing of advantages of the German system of savings banks could provide inspiration for bank systems in other European countries Due to the different conditions and cultures in the European countries a one-to-one transfer would not be feasible However, learning from the differences could provide benefits for all Because to their long tradition as ‘learning institutions’ savings banks across Europe could learn from each other how best to develop regions In order to maximise such learning effects, more research and comparative analyses should be done of European savings Banks, of their instruments and their significance in a ‘Europe of Regions’ 29 REFERENCES Literature ALESSANDRINI, Pietro, ZAZZARO, Alberto “A ‘Possibilist’ Approach to Local Financial Systems and Regional Development: The Italian Experience.” In MARTIN, R (ed.) 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Die Bedeutung von externen Effekten und Kollektivgütern für die regionale Entwicklung Münster, Lit-Verlag, 2002, 109-127 Data Resources BBR (Bundesamt für Bauwesen und Raumordnung) Indikatoren und Karten zur Raumentwicklung CD-Rom, Bonn, 2004 BBR (Bundesamt für Bauwesen und Raumordnung) Indikatoren und Karten zur Raumentwicklung CD-Rom, Bonn, 2005 DSGV (Deutscher Sparkassen- und Giroverband) Bilanzstatistik (extra analyse) 2006 STATISTISCHE ÄMTER DER LÄNDER Arbeitnehmerentgelt in den kreisfreien Städten und Landkreisen, 2004 STATISTISCHE ÄMTER DER LÄNDER Auswertung durch das Landesamt für Datenverarbeitung und Statistik Nordrhein-Westfalen Düsseldorf, 2005 Internet Ressources http://www.gutfuerdeutschland.de/nachrichten/globaler_champion.html http://www.statsoft.com/textbook/stathome.html Interviews ARNOLD, Gabriela, Sparkasse Altmark West BLÜML, Wolfram, Kreis Biberach BÖTHER, Ulrich, Sparkasse Altmark West (Chairman of Executive Board) ELLERKAMP, Thomas, Wirtschafts- und Beschäftigungsförderung Dortmund KOLB, Michael, Sparkasse Darmstadt 32 KOLMER, Michael, Stadt Darmstadt LEHR, Peter, Sparkasse Darmstadt MORAWITZ, Christian, Kreissparkasse Biberach (Executive Board) NEBEN, Holger, Sparkasse Altmark West OSTERMANN, Hans-J., Altmarkkreis Salzwedel RÖLLINGHOFF, Stefan, Dr., Stadt Dortmund SCHMITT, Wolfgang , Kreissparkasse Biberach SELLNER, Georg, Sparkasse Darmstadt (Chairman of Executive Board) STEEMANN, Dieter-K., Stadt Dortmund STICKEL, Georg, Dr , Kreissparkasse Biberach STRAUB-Neumann, Ursel, Kreissparkasse Biberach WEIGELE, Otmar M., Dr., Kreissparkasse Biberach (Chairman of Executive Board) WEISER, Karl-H., Sparkasse Dortmund WURZEL, Christian, Sparkasse Dortmund TABLES AND FIGURES Fig 1: Levels of regional policy .4 Fig 2: Savings banks and the spatial structure .18 Fig 3: Correlation between economic success of German savings banks and regional prosperity 19 Fig 4: Table with Correlation Coefficients (Spearman) between the Regional Indicator and the economic success of Savings Banks 21 Fig 5: Relationships in regional Banking Market: effects, social capital and regional market power 24 33 ... by inspecting the correlation between the economic success of regions and savings banks How German savings banks act in regions is the question in chapter 5, in which four savings banks and their... because of their knowledge of regional economy and of the supply of financial services, they also spend the regional savings only in the region, and therefore reduce capital drains from the poorer... represented in the East of Germany The higher banking-profit realized in these regions derive indirectly from the incentives of these banks in establishing lending relationships Following modern banking