• Technological progress
  
  Technology is one of the key factors influencing the banking sector in Europe. Most banks in the regions, especially Western Europe, have invested in automating their banking operations. Much of it was proprietary in nature. However, the availability of new, sophisticated technology solutions led to small and mid-tier banks adopting off-the-shelf solutions. Stymied by their legacy systems so far, even the tier 1 banks have started considering third party solutions. Recent analysis suggests that European banks’ IT spending increased from around 10% of total expenses at the beginning of the 1990s to 30% by 2005. Remote delivery channels are widely deployed by most banks in Europe especially those in the Scandinavian countries. The high availability of broadband facilities has made Internet banking taken-up increasingly over the past few years, while analysts predict that mobile banking, too, will take off in the near future. Increased focus on risk management and compliance requirements have seen high levels of technology investments in these areas as well.
  
  Going ahead, in the aftermath of the credit crisis, analysts suggest that IT investments though slightly reduced, will still be a key area of focus. Investments might be reprioritized, although it is expected that areas such as risk management and core banking replacement will continue to be a key focus area.

  German banking industry : An overview

  Europe’s largest economy and the second-most populous nation, Germany was once celebrated as Europe’s economic powerhouse. But falling exports combined with high costs due to an inflexible labour and services market and the modernization and integration of East Germany have contributed to muted economic growth. Amidst growing fears of a recession, the German government recently slashed its growth forecast for 2009 from 1.2% to 0.2%. In the face of the ongoing financial crisis the German Parliament has approved a €500 billion ($675 billion) financial rescue package. Earlier, on 6 October 2008, the government stepped in to avoid the collapse of Germany’s second-biggest commercial property lender, Hypo Real Estate. In an attempt to prevent a subsequent run on banks, the government announced it would guarantee all personal bank deposits in the country.
  
  The German banking industry is dominated by universal banks that combine the functions of commercial and investment banks, including the securities business. The Association of German Banks estimates that universal banks contribute to over 75% of the industry’s total business volume. A striking feature of the country’s banking industry is the high number of banks and the dense branch network. There are over 2,300 banks in Germany with over 46,000 branches. Around 1,500 of the banks are very small in size with a business volume of less than €1 billion.