Both the German financial system in general and SME financing as a key component of this system have been undergoing a considerable structural transformation since the beginning of the 21st century. This process is being driven by several trends simultaneously: the transformation process has recently picked up speed. This development means that markets and valuations in line with market conditions are becoming increasingly important.

The European unification process has suffered major political setbacks this year. Going forward, further integration on the financial and banking markets is likely to be determined more by market forces than by politics.

The optimists had their finest hour in the late 1990s. Euphoria ruled on Finanzplatz Deutschland. The stock market boom, the ascendancy of the “Neuer Markt“, the placement of the “people’s share“ Telekom, introduction of the electronic trading platform Xetra and, last but not least, the arrival of the European Central Bank in Frankfurt fueled the most fabulous dreams of Frankfurt’s role in a uniting Europe.

In recent years the German banking system has shown itself to be stable even under heavy pressure, but its profitability was very poor. The corner has now been turned, above all on the costs side. As the economic backdrop improves, this trend is likely to lead to a sustained catch-up process.