The German Cooperative Banking System: Volksbanken and Raiffeisenbanken

The German cooperative banks, namely the Raiffeisenbanken and Volksbanken and their central institutions, linked together in the so called Finanzverbund, define the “third pillar” of the German banking system beside the large commercial banks (also known as Grossbanken like Deutsche Bank, Dresdner Bank, Commerzbank and HypoVereinsbank, recently merged with the Italian Unicredit Banking Group) and the savings banks’ network (the so called Sparkassen and Landesbanken). Given a general overview of the size and structure of the German cooperative banking market, the present analysis focuses on the institutional framework of the cooperative system, both on the associative and entrepreneurship level, considering its legal and operational peculiarities. The chapter further investigates the network strategies and the business relations of and within the Raiffeisen and Volksbanken sector, taking into consideration the governance structure of the (first and second level) bank entities. This is in order to highlight the capability of the German mutual banks to act as an Allfinanz-banking group and not as a loose collection of individual financial intermediaries by preserving the statutory independence of the single first level bank entity.