This study utilised four banks in Europe and compared them paying particular attention to Germany. The study asked to what extent German banks could be said to be riskier than other European competitors in relation to three factors loans, security and deposits. The data used was a piece of research conducted by uparab.com that was related to the risk involved in banks. It was found that there was a significant difference between the risk in German banks and risk in other banks in Europe in relation to security. No significant difference was found between the countries in relation to loans andor deposits. It was noted that only banks from three other countries in Europe were used in this analysis so a real representation of Europe was not made. The significance of year range was also taken into account on summation. It was advised that future research could be conducted into this area of research using the findings of the uparab.com data as a pilot.
There is much scepticism towards banks in the contemporary sense. This is because of the recent collapse in American sub-prime lending and the nicknamed credit crunch in Europe. This has led to banks halting their credit and becoming more rigid in their funding of loans. Further, it has led to cash injections made by the state in an attempt to steady the economy. This has led to concern regarding the safety of banks and also the publics faith in banking. A number of primary data sets related to the confidence in banks that indicates a number of relative variables can be found on the Arabic website uparab.com. One such study utilised the figures pertaining to different facets of four European banks. For this report, we shall compare them paying particular attention to the German banks.
Review of relevant literature and theory
A great deal of research has been produced in relation to comparisons in the European market due to relatively recent observations in economic downturns, which have indicated a degree of differences across nations. For instance, a study conducted by Lozano-Viva et al (2004) analysed the technical efficiency between each country by using samples following the Data Envelopment Analysis (DEA). The comparison of core European nations, including Germany, were found to show that country-specific environmental conditions exercised a strong influence over the behaviour of each countrys banking industry (Lozano-Vivas et al, 2004). This indicated that there were crucial differences depending upon national variables in relation to banking risks.
This is compouned by former study which has established a link between European banking and the American market. For instance, research by De Bandt Davis (1999) found that the level of competition was relatively low in France and particularly Germany indicating that there would be a rise in competition in smaller banks in those regions. They concluded that the research implied a notable rise in competition for small banks in France and Germany, as well as an increase in competition for large banks, especially in Italy (De Bandt Davis, 1999). However, the research also indicated the nature in which banks could be seen to be taking risks in relation to the different sizes of each bank. Essentially, smaller banks would use a more deposit orientated approach to lending, whereas the bigger banks would put more emphasis upon security.
In a recent piece of research conducted by Schmidt et al, a comparison of the banking and lending habits of three countries was incorporated. It was found that positive changes were being made in both Britain and France, but not in Germany. Schmidt et al stated that
We find that there is neither a general trend toward disintermediation, nor toward a transformation from bank-based to capital market-based financial systems, nor toward a loss of importance of banks. Only in the case of France could strong signs of transformation as well as signs of a general decline in the role of banks be found. Thus the three financial systems also do not seem to be converging. (Schmidt et al, 2001)
It is with this seemingly backward step being taken by Germany in relation to banking and maintaining risk factors that we will turn to the data in the recent study conducted by Schmidt et al (2001) to see to what extent we can say that German banks are more riskier than other European banks.
Methodology and Data
The methodology used in this report was a quantitative comparison between Germany and three other banks in Europe. The use of an ANOVA test was employed across three variables to asses different areas of risk. The methodological tasks performed in this section was based upon the data sets gathered by uparab.com. This created a number of possible hypotheses based upon the report title. It was decided that three of the variables would be used to measure the variable. These included deposit score, loan score and security score, each of which would be compared via country. The data used in the result and discussion section was therefore adapted from the original piece of primary research by leaving out many of the other variables by creating a derived variable from three others. Further, the research questions and hypotheses and ways of analysing the data were slightly revised from the original study to incorporate the title question and revised to fit this test. Furthermore, the coverage of this is limited to an analysis of a one-way between subjects designs only. Therefore, there was no demonstration of either multivariate or factorial analyses, which could be used on data such as this. Three separate tests were devised as individual between subjects ANOVA tests. Histographs were chosen as figures to illustrate both the descriptive and inferential descriptions in all of the tests. The graphs were split into four figures showing the curve in each condition rather than a comparison of the conditions. The hypotheses in either condition were devised to incorporate findings in relation to potential risk.
Fig 1. Table of Descriptive Statistics for Loan Scores.
We can see from the table in figure one that the mean loan score in the be condition (N15) was 1666.73 and that the standard deviation was 1529.19. We can also see from the table in figure one that the mean score for de (N15) was 1913.73 and that the standard deviation was 369.22. The score for fr (N15) was 1553.60 and the standardc deviation was 671.59 and the score for ie (N15) was 1970.87 while the standard deviation was 973.35 We can see that there is no clearly observable difference between the four variables.
Fig 2. Graph Showing the Differences in Amount of Loan Score Between the Four Countries.
We can see from the graph that there is no significant difference in loan scores across countries. The mean average shows the difference in scores between each country. The standard deviation shows the spread of the mean values in either condition. The variance between the two sets of data was found not to be significant according to the ANOVA test (F(3, 56) .611 p 0.61). It would appear from the data that there is no significant difference between the four countries in relation to deposits. Therefore, it cannot be said that the there is a heightened risk arising from loans in German banks than in other areas of Europe.
Fig. 3 Table of Descriptive Statistics for Security Scores.
We can see from the table in figure one that the mean loan score in the be condition (N15) was 934.67 and that the standard deviation was 704.70. We can also see from the table in figure one that the mean score for de (N15) was 1317.00 and that the standard deviation was 311.36. The score for fr (N15) was 299.67 and the standard deviation was 185.91 and the score for ie (N15) was 1568.83 while the standard deviation was 854.32 We can see that there is an observable difference between the four variables.
The inferential statistics revealed that there was a significant difference between the scores in the security data between the four countries (F(3,56) 13.34, p 0.005).
Fig. 4 Graph Showing the Differences in Amount of Security Score Between the Four Countries.
We can see from the graph that there is a significant difference in security scores across countries. The mean average shows the difference in scores between each country. The standard deviation shows the spread of the mean values in either condition. The variance between the two sets of data was found not to be significant according to the ANOVA test (F(3,56) 13.34, p 0.005). It would appear from the data that there is no significant difference between the four countries in relation to deposits. Therefore, it can be said that the there is a heightened risk arising from security in German banks than in other areas of Europe.
Fig 5. Table of Descriptive Statistics for Deposit Scores.
We can see from the table in figure one that the mean loan score in the be condition (N15) was 2404.27 and that the standard deviation was 2077.26. We can also see from the table in figure one that the mean score for de (N15) was 3082.00 and that the standard deviation was 689.36. The score for fr (N15) was 1827.47 and the standard deviation was 840.87 and the score for ie (N15) was 2805.20 while the standard deviation was 1649.53 We can see that there is no clearly observable difference between the four variables.
The inferential statistics revealed that there was no significant difference between the scores of the countries in the deposit condition (F(3, 56) 2.165 p 0.102).
Fig. 6 Graph Showing the Differences in Amount of Deposit Score Between the Four Countries.
We can see from the graph that there is no significant difference in deposit scores across countries. The mean average shows the difference in scores between each country. The standard deviation shows the spread of the mean values in either condition. The variance between the two sets of data was found not to be significant according to the ANOVA test (F(3, 56) 2.165 p 0.102). It would appear from the data that there is no significant difference between the four countries in relation to deposits. Therefore, it cannot be said that the there is a heightened risk arising from deposits in German banks than in other areas of Europe.
It would appear from the findings of the results that there is a significant difference between the risk in German banks and risk in other banks in Europe in relation to the mean average of scores from the security condition. Further, there appears to be no significant difference between the countries in relation to risk in either the loan and deposit scores. However, only banks from three other countries in Europe were used in this comparative analysis and the data was obtained across a specified range between the years 1994 and 2008. Essentially, there may be variants that have changed the potential risk in recent years and Europe cannot be said to be represented by three nations in total. Nevertheless, the findings have indicated an area of interest that may be taken up by future research aimed at identifying the risks in European banks or trading practices.
There is much scepticism towards banks in the contemporary sense. This is because of the recent collapse in American sub-prime lending and the nicknamed credit crunch in Europe. This has led to banks halting their credit and becoming more rigid in their funding of loans. Further, it has led to cash injections made by the state in an attempt to steady the economy. This has led to concern regarding the safety of banks and also the publics faith in banking. A number of primary data sets related to the confidence in banks that indicates a number of relative variables can be found on the Arabic website uparab.com. One such study utilised the figures pertaining to different facets of four European banks. For this report, we shall compare them paying particular attention to the German banks.
Review of relevant literature and theory
A great deal of research has been produced in relation to comparisons in the European market due to relatively recent observations in economic downturns, which have indicated a degree of differences across nations. For instance, a study conducted by Lozano-Viva et al (2004) analysed the technical efficiency between each country by using samples following the Data Envelopment Analysis (DEA). The comparison of core European nations, including Germany, were found to show that country-specific environmental conditions exercised a strong influence over the behaviour of each countrys banking industry (Lozano-Vivas et al, 2004). This indicated that there were crucial differences depending upon national variables in relation to banking risks.
This is compouned by former study which has established a link between European banking and the American market. For instance, research by De Bandt Davis (1999) found that the level of competition was relatively low in France and particularly Germany indicating that there would be a rise in competition in smaller banks in those regions. They concluded that the research implied a notable rise in competition for small banks in France and Germany, as well as an increase in competition for large banks, especially in Italy (De Bandt Davis, 1999). However, the research also indicated the nature in which banks could be seen to be taking risks in relation to the different sizes of each bank. Essentially, smaller banks would use a more deposit orientated approach to lending, whereas the bigger banks would put more emphasis upon security.
In a recent piece of research conducted by Schmidt et al, a comparison of the banking and lending habits of three countries was incorporated. It was found that positive changes were being made in both Britain and France, but not in Germany. Schmidt et al stated that
We find that there is neither a general trend toward disintermediation, nor toward a transformation from bank-based to capital market-based financial systems, nor toward a loss of importance of banks. Only in the case of France could strong signs of transformation as well as signs of a general decline in the role of banks be found. Thus the three financial systems also do not seem to be converging. (Schmidt et al, 2001)
It is with this seemingly backward step being taken by Germany in relation to banking and maintaining risk factors that we will turn to the data in the recent study conducted by Schmidt et al (2001) to see to what extent we can say that German banks are more riskier than other European banks.
Methodology and Data
The methodology used in this report was a quantitative comparison between Germany and three other banks in Europe. The use of an ANOVA test was employed across three variables to asses different areas of risk. The methodological tasks performed in this section was based upon the data sets gathered by uparab.com. This created a number of possible hypotheses based upon the report title. It was decided that three of the variables would be used to measure the variable. These included deposit score, loan score and security score, each of which would be compared via country. The data used in the result and discussion section was therefore adapted from the original piece of primary research by leaving out many of the other variables by creating a derived variable from three others. Further, the research questions and hypotheses and ways of analysing the data were slightly revised from the original study to incorporate the title question and revised to fit this test. Furthermore, the coverage of this is limited to an analysis of a one-way between subjects designs only. Therefore, there was no demonstration of either multivariate or factorial analyses, which could be used on data such as this. Three separate tests were devised as individual between subjects ANOVA tests. Histographs were chosen as figures to illustrate both the descriptive and inferential descriptions in all of the tests. The graphs were split into four figures showing the curve in each condition rather than a comparison of the conditions. The hypotheses in either condition were devised to incorporate findings in relation to potential risk.
Fig 1. Table of Descriptive Statistics for Loan Scores.
We can see from the table in figure one that the mean loan score in the be condition (N15) was 1666.73 and that the standard deviation was 1529.19. We can also see from the table in figure one that the mean score for de (N15) was 1913.73 and that the standard deviation was 369.22. The score for fr (N15) was 1553.60 and the standardc deviation was 671.59 and the score for ie (N15) was 1970.87 while the standard deviation was 973.35 We can see that there is no clearly observable difference between the four variables.
Fig 2. Graph Showing the Differences in Amount of Loan Score Between the Four Countries.
We can see from the graph that there is no significant difference in loan scores across countries. The mean average shows the difference in scores between each country. The standard deviation shows the spread of the mean values in either condition. The variance between the two sets of data was found not to be significant according to the ANOVA test (F(3, 56) .611 p 0.61). It would appear from the data that there is no significant difference between the four countries in relation to deposits. Therefore, it cannot be said that the there is a heightened risk arising from loans in German banks than in other areas of Europe.
Fig. 3 Table of Descriptive Statistics for Security Scores.
We can see from the table in figure one that the mean loan score in the be condition (N15) was 934.67 and that the standard deviation was 704.70. We can also see from the table in figure one that the mean score for de (N15) was 1317.00 and that the standard deviation was 311.36. The score for fr (N15) was 299.67 and the standard deviation was 185.91 and the score for ie (N15) was 1568.83 while the standard deviation was 854.32 We can see that there is an observable difference between the four variables.
The inferential statistics revealed that there was a significant difference between the scores in the security data between the four countries (F(3,56) 13.34, p 0.005).
Fig. 4 Graph Showing the Differences in Amount of Security Score Between the Four Countries.
We can see from the graph that there is a significant difference in security scores across countries. The mean average shows the difference in scores between each country. The standard deviation shows the spread of the mean values in either condition. The variance between the two sets of data was found not to be significant according to the ANOVA test (F(3,56) 13.34, p 0.005). It would appear from the data that there is no significant difference between the four countries in relation to deposits. Therefore, it can be said that the there is a heightened risk arising from security in German banks than in other areas of Europe.
Fig 5. Table of Descriptive Statistics for Deposit Scores.
We can see from the table in figure one that the mean loan score in the be condition (N15) was 2404.27 and that the standard deviation was 2077.26. We can also see from the table in figure one that the mean score for de (N15) was 3082.00 and that the standard deviation was 689.36. The score for fr (N15) was 1827.47 and the standard deviation was 840.87 and the score for ie (N15) was 2805.20 while the standard deviation was 1649.53 We can see that there is no clearly observable difference between the four variables.
The inferential statistics revealed that there was no significant difference between the scores of the countries in the deposit condition (F(3, 56) 2.165 p 0.102).
Fig. 6 Graph Showing the Differences in Amount of Deposit Score Between the Four Countries.
We can see from the graph that there is no significant difference in deposit scores across countries. The mean average shows the difference in scores between each country. The standard deviation shows the spread of the mean values in either condition. The variance between the two sets of data was found not to be significant according to the ANOVA test (F(3, 56) 2.165 p 0.102). It would appear from the data that there is no significant difference between the four countries in relation to deposits. Therefore, it cannot be said that the there is a heightened risk arising from deposits in German banks than in other areas of Europe.
It would appear from the findings of the results that there is a significant difference between the risk in German banks and risk in other banks in Europe in relation to the mean average of scores from the security condition. Further, there appears to be no significant difference between the countries in relation to risk in either the loan and deposit scores. However, only banks from three other countries in Europe were used in this comparative analysis and the data was obtained across a specified range between the years 1994 and 2008. Essentially, there may be variants that have changed the potential risk in recent years and Europe cannot be said to be represented by three nations in total. Nevertheless, the findings have indicated an area of interest that may be taken up by future research aimed at identifying the risks in European banks or trading practices.
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