The balance sheet structure of the German banking industry

Interbank business, that is to say loans and deposits between banks, makes up a quarter of the balance sheet total. These operations serve to exchange liquidity between banks. Loans to non-banks account for just under half the banks’ total business and securities holdings for around one fifth. On the liabilities side of the balance sheet, 38% is accounted for by deposits held by non-banks and almost a quarter by bearer debt securities issued by banks.

Source: Deutsche Bundesbank

Securities operations have expanded radically on both sides of the balance sheet in recent years. One of the main reasons for this is customers’ growing appetite for investing in securities and with institutional investors (investment funds and insurance companies), which invest part of the savings entrusted to them in bank bonds. In addition, non-bank companies are making greater use of the capital markets as a source of funding. As a result, the banks now hold an increasing number of corporate securities. In addition, the banks have a growing need for securities which can be used for daily trading, to collateralise loans, for securities lending transactions or to secure deliverability in derivatives trades.

In consequence, growth in lending and deposit-taking has been disproportionately slow in recent years. Nevertheless, this remains the core business of the German banks.