IBF Paper Series

IBF Paper Series 01-17
Carsten Burhop, Rheinische Friedrich-Wilhelms-Universität Bonn / Joachim Scholtyseck, Rheinische Friedrich-Wilhelms-Universität Bonn / Moritz Schularick, Rheinische Friedrich-Wilhelms-Universität Bonn / Paul Thomes, RWTH Aachen

Editorial

Preface by the Board of Editors.
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IBF Paper Series 02-17
Gerd Hardach, Philipps-Universität Marburg

Sparen in der ‹Nullzinsphase›. Privatanleger und der Kapitalmarkt in Deutschland im Ersten Weltkrieg
Saving in the ‹Zero Interest Period›. Private Investors and the Capital Market in Germany in the First World War

This paper offers a look back at the period of zero interest and even negative interest during the First World War. In contrast to the current period of low interest rates, during the war there was an illusion of interest: while savers did receive nominal interest on their deposits, however, the savings deposits lost value due to the war inflation such that it was effectively negative interest. Even at the end of the war only very few savers were aware that they had experienced a period of declining interest. Rather, they assumed that the purchasing power of the mark and the exchange rate would soon settle down at the pre-war level. The full scope of the dilemma for private investors during the zero interest period became apparent only in the post-war inflation. Although various options between inflation and deflation were still discussed during the revolution and at the beginning of the Weimar Republic, the monetary and fiscal path subsequently taken resulted in the uncontrolled inflation that had significantly greater effects on private investors and the capital market than the war inflation that directly preceded it.
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IBF Paper Series 03-17
Carsten Burhop, Rheinische Friedrich-Wilhelms-Universität Bonn

Die betriebliche Altersvorsorge zur Zeit der Bonner Republik
Corporate Retirement Plans during the Bonn Republic

Alleviating the consequences of the war were at the center of social policy during the early years of the young republic. Yet up to 1956 pensions rose only slowly and irregularly so that old-age poverty remained widespread. The transition to a dynamic pension system based on gross earnings with the 1957 Pension Reform was the major step from a social state battling need and poverty to the caregiving welfare state. The minimum pension – abolished in 1957 – was reintroduced with the 1972 Pension Reform, paving the way to the early retirement society. This paper investigates the development of corporate pension plans up to the end of 1970s. Using Volkswagen and Merck as case studies, it shows that companies reacted to changes in the economic situation earlier than did the legislature and adjusted their social benefits systems accordingly. Parallel to the transition to the dynamic pension system based on gross earnings during the late 1950s, corporate retirement plans experienced an expansion, that is to say, following the 1957 Pension Reform, private benefits were not yet replaced by public benefits. This did not change until the expansion of the social state during the 1970s. The objective of including the Works Councils in the corporate pension discussion was to curb corporate social benefits.
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IBF Paper Series 04-17
Harald Wixforth, Bielefeld / Bremen

Die Beziehungen der Norddeutschen Wollkämmerei und Kammgarnspinnerei zu den Banken
The Relationship of the Norddeutsche Wollkämmerei und Kammgarnspinnerei (Nordwolle Group) with the Banks

Research into the relationship between banking and industry has long held the view that banks had dominated their clientele from industry, trade and retailing and they had established a position of power that was almost impossible to reign in. More recent studies question this assessment and deliver impressive evidence that the relationship between industry and banks was often characterized by information asymmetries. For example, major companies often withheld information about their earnings performance during credit negotiations so that the banks had to make large risk provisions which reduced their profitability. This was also true for the Nordwolle textile group, which had financed the expansion of its business during the Weimar Republic primarily from outside capital, first and foremost using loans from various banks. In obtaining these loans, the Group's management succeeded repeatedly in playing competing banks against one another. Even major banks such as Danat-Bank, Berliner Handelsgesellschaft, and probably Dresdner Bank as well, placed major bets on getting Nordwolle to commit itself as a client. As long as the banks could be talked into believing that company was profitable and continually expanding, the banks were ready to grant new loans. Not until the spring of 1931, after indications about the Group's actual situation had made the rounds did the banks push through extensive audits of the company's financial statements. That the efforts to rescue Nordwolle ultimately remained fruitless was not least a result of the new-found caution in awarding additional loans.
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IBF Paper Series 05-17
Peter Gleber, Berlin

Die Genossenschaftliche Institutssicherung – ein notwendiges Instrument zur Stärkung des Kundenvertrauens und des Risikomanagements im dezentralen Bankenverbund
Cooperative Institutional Protection – a Necessary Instrument for Strengthening Customer Trust and Risk Management in Local Banking Groups

The protection scheme of the cooperative financial network goes back to the guarantee funds of the German ‹Volksbanken›, the world's oldest privately-financed protection system for banks. The core task of institutional protection is to protect the cooperative banks and hence the protection of the member's and customers' deposits, investments and savings. The local roots of the credit cooperatives rest in the 19th century. During the so-called formative phase, protection schemes were established for the newly-created cooperative lending networks of ‹Volksbanken› and rural cooperative banks, which have been a joint cooperative financial network since 1972. Since that time, the cooperative banks' combined protection scheme has developed into a unique protection system with complex tools for risk management.
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IBF Paper Series 06-17
Sibylle Lehmann-Hasemeyer, University of Hohenheim / Jochen Streb, University of Mannheim

Does Social Security crowd out Private Savings? The Case of Bismarck’s System of Social Insurance

Imperial chancellor Bismarck’s system of social insurance (with its three pillars health, accident and pension insurance) was an important role model for social security systems across Europe and in the US. How the introduction of the German system changed economic expectations and decisions of the German workforce has not been researched, though. This article closes this gap by analyzing the development of Prussian savings banks’ deposits in the late 19th century with the help of a difference-in-difference-like approach. We show that, in the Prussian case, social security crowded out private savings considerably. As counterfactual voluntary savings would have been far from sufficient, however, Bismarck’s social insurance system was still needed to fight the misery workers and their families potentially faced in old age or times of sickness.
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IBF Paper Series 07-17
Detlef Krause, Frankfurt am Main

Hamburg als Standort der privaten Universal-/Großbanken im 19. und frühen 20. Jahrhundert
Hamburg as a Site of Private Full-service/ Major Banks in the 19th and Early 20th Centuries

The Hamburg banking sector experienced considerable structural changes in the period from 1850 until into the 1930s. Around 1856 and 1870, a large number of new banks were founded, mostly in the form of stock corporations. Starting in the 1890s, the banking center saw a consolidation with foreign banks locating there and the commencement of foundings of branches. What is striking is the bilateral integration of Hamburg with Berlin, the financial center. While the banking relationships with the imperial capital meant a relative loss of importance for the local Hamburg banks, it also brought a considerable overall benefit to Hamburg as a financial center. Typical for the Hamburg financial center was the major and long-standing significance of the merchant banker, whose business was rooted primarily in the mercantile trade. Also striking was the large number of small private banking businesses in the 1920s.
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IBF Paper Series 09-17
Arno Bäcker, Hauptverwaltung der Deutschen Bundesbank in Hamburg, Mecklenburg-Vorpommern und Schleswig-Holstein / Christian Hecker, Hauptverwaltung der Deutschen Bundesbank in Hamburg, Mecklenburg-Vorpommern und Schleswig-Holstein

Die Geschichte des Finanzplatzes Hamburg – Anmerkungen aus Sicht einer Zentralbank
Remarks on the History of Hamburg as a Financial Centre from a Central Bank’s Point of View

Two features of the history of Hamburg as a financial centre are of particular interest from the perspective of a central bank: The estab-lishment of Hamburger Bank in 1619 as a proto-central bank and the handling of two liquidity or financial crises in the 19th century. Hamburger Bank provided the regional economy with a stable unit of account by creating the Mark Banco. It was defined by a fixed amount of silver. Hamburger Bank took in deposits which were credited in Mark Banco. Therefore, the Mark Banco could also be used as an easy medium of exchange between creditors. As a result, de facto Hamburger Bank also served as a basic payment system. The stability of its unit of account and its settlement services made the bank attractive beyond local borders in supra-regional trade. It may well be argued that Hamburger Bank became a catalyst for the region’s economic development. However, the bank did not have the means, nor did it have a public mission to help out in the financial crises which ensued following the big fire of Hamburg in 1842 and the international economic crisis of 1857. These events showed, inter alia, that liquidity and counterparty risks had been neglected by the mer-chant bankers of the day despite the backdrop of increased interna-tional trade and economic complexities. Furthermore, the resolution of the crisis of 1857 by public means was already viewed in a critical way by contemporaries who understood that such interventions could create future risks for the financial centre by means of moral hazard.
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