We investigate the funding modes of German banks and the implications for lending and profitability during 1992–2002. We find that at many banks, deposits from customers decrease in relative terms while interbank liabilities increase as a source of funding. We cannot detect a negative impact of the relative decline in deposits on lending. The decreasing ability of banks to collect deposits and the substitution of deposits by interbank liabilities unfavorably affects the net interest result of banks that exhibit a deposit deficit, especially savings banks. Our findings indicate a structural lengthening of the intermediation chain, which has broader implications for the functioning and stability of the financial system.

Additional Metadata
Keywords deposit taking, interbank markets, universal banking
JEL Banks; Other Depository Institutions; Mortgages (jel G21)
Persistent URL dx.doi.org/10.1007/s10693-010-0084-5, hdl.handle.net/1765/22275
Series ERIM Article Series (EAS)
Journal Journal of Financial Services Research
Norden, L, & Weber, M. (2010). Funding Modes of German Banks: Structural Changes and their Implications. Journal of Financial Services Research, 38(2), 69–93. doi:10.1007/s10693-010-0084-5