Year:    1994

Author:    Cox, Helmut

Credit and Capital Markets – Kredit und Kapital, Vol. 27 (1994), Iss. 2 : pp. 235–267

Abstract

Privatise Municipal Savings Banks? Competition-Theory and Competition-Policy Observations

The author of this contribution studies whether the demand for privatising the municipal savings banks is a requirement under general economic and competition- theory aspects. In doing so, he reviews in a critical manner the pros and cons of the Monopoly Commission’s demand included in its 9th main expertise to privatise the municipal savings banks for general economic policy principles. In this context, the author of this contribution reaches the conclusion that - in the case of commercial enterprises which are, though in public ownership, exposed to competition and which include the municipal savings banks - one cannot at all speak about “centralised decision-making” and “politically defined business objectives” within the meaning of the theory of central economic management and that competition amongst groups of financial institutions, i.e. publicly owned credit institutions, private banks and cooperative banks, is not limited to a “closed and selfcontained banking market they divide up amongst themselves”. He attempts to prove that what is called group competition is no competition among groups, but between individual banks in different ownership pursuing partly divergent business objectives and that especially the heterogeneity of the banking structure might contribute substantially to the functioning ability of competition. The author does not rule out the possibility of privatising publicly owned companies under specific circumstances, but he demands that the tasks justified by reasons of the “public interest” be thoroughly examined and that a market structure analysis be made in the interest of assessing the implications of privatisation for the market structure and the competition pattern in the future, before any privatisation decision is taken.