Abstract
The EEC's first banking directive (77/780/EEC) established the authorization system for credit institutions in each member state in 1977. Twelve years later, the single authorization system and the home country control were adopted through the second banking directive (89/646/EEC). In the financial services sector, the integration of a single market has made great strides forward.
The universal banking model which the EU adopted came from the German banking system, however such a system had never existed in France until 1984. The German banking system has served as a basis for the regulatory structure of the common market of the EU. Under the influence of this system in neighboring countries, the French banking system underwent various reforms. The universal banking system was introduced by the Banking Act of 24 January 1984.
In the 1990s, each member state liberalized their financial services markets and brought on competition in an open-market system under a single currency, the euro. The regulatory harmonization of the EU financial services market was further brought to fruition via the Financial Services Action Plan (FSAP).
Despite freer competition and many examples of state enterprises being privatized, there still appears to be low competition from outside players in each domestic market, which is confirmed by an EU Commission report which showed that cross-border M & A activity is still very low.
This report suggests that measures up to now, such as single-nationality or regulatory harmonization may not be enough to spur cross-border competition. Further policies that encourage freer competition across the EU may be needed. For example, one area in need of improvement may be changing policies that continue to allow local governments to protect and favor their regions' public or legal institutions. Private institutions have long protested against such protectionism.
In Germany, as a result, the guarantees for the saving banks (Sparkasse) and its central institutions (Landesbank) from their public owner were abolished in July of 2005. In France some parts of the largest state-owned credit institution, CDC, were separated and privatized, leading the savings bank division, known as Caisses d'épargne, to be spun out as a cooperative bank.
From the viewpoint of the traditional German economic model, which is known as “Soziale Marktwirtschaft” (social market economy), the privatization of state-owned institutions might be interpreted as the demise of Germany's long-held social market economy. However, there is still great inheritance in many of the EU member countries under such privatization moves. These cases on Germany and France in EU give some suggestions to the recent economic policies in Japan under the globalization.
