Felix Somary’s encyclopedia contribution examines German credit banks before and after the First World War, combining institutional history with an analysis of their changing economic function. Its central contrast is between banks that organized industrial development and banks whose wartime and inflationary expansion made them dependent on state finance. Organizational growth, concentrated deposits, and rising profits did not necessarily indicate greater financial strength. Somary asks what banks actually financed, how they maintained liquidity, and whose interests their market power served. The contribution has two chronological sections, supported by balance-sheet and earnings tables, principally covering 1913–1920.
The prewar account begins with the international networks of nineteenth-century private bankers, followed by the later emergence of joint-stock banks and nationwide organizations. Somary identifies the combination of deposit-taking and corporate finance as the distinctive feature of German banking:
Die Banken vereinigen die Aufgaben der englischen Depositenbanken, der merchants und teilweise selbst der brokers.
English translation: The banks combine the functions of the English deposit banks, the merchants, and to some extent even the brokers.
This combination helped overcome Germany’s relative scarcity of large private fortunes. By supplying both working capital and longer-term investment credit, banks accelerated the development of large industrial and transport enterprises. Somary treats their entrepreneurial role positively: they supported productive ventures against bureaucratic obstacles and a public hostility to speculation that also impeded enterprise. But he rejects reported syndicate profits as an adequate measure of this activity. Its importance becomes visible only by considering together loans to affiliated enterprises, securities holdings, syndicate participations, and credit secured against those enterprises’ shares. Published accounting categories could obscure the economic unity of bank finance.
The same integration that facilitated industrial development also subordinated securities markets to banks. Control over investment flows and stock-exchange money gave the major institutions greater authority than exchanges themselves:
Die Berliner Börse konnte vor dem Krieg mit der Londoner, der Pariser oder Brüsseler nicht verglichen werden: sie war mehr ein Clearingplatz für die Aufträge der Banken als ein freier Markt.
English translation: Before the war, the Berlin stock exchange could not be compared with those of London, Paris, or Brussels: it was more a clearing place for the banks’ orders than a free market.
Somary thus presents financial coordination and market dependence as connected outcomes. Industrial lending also immobilized resources, a problem that became more acute as deposits grew relative to banks’ own capital. The crises of 1900 and 1907 encouraged improvements in domestic liquidity, but independent reserves sufficient to strengthen international liquidity were not established before the war. Organizational concentration likewise advanced unevenly: affiliations with provincial banks initially substituted for extensive branch networks, while the growing importance of ordinary banking business subsequently encouraged decentralization through local offices.
War changed the substance of banking more radically than its outward expansion suggests. Because the Reich’s cash financing displaced banks’ direct financing of wartime enterprises, their principal lending function contracted. Inflation enlarged deposits and other outside funds, which banks invested predominantly in Treasury bills. The spread between low remuneration of depositors and higher Treasury-bill yields produced easy profits, weakening the connection between earnings and useful banking services.
Sie waren mit wenigen Ausnahmen während des Krieges zu Staatsbanken geworden und blieben es überwiegend auch nach dem Kriege.
English translation: With few exceptions, they had become state banks during the war and largely remained so after the war.
“State banks” here describes dependence on government financing, rather than a claim about formal ownership. Liquidity rested on the ability to place Treasury bills, not on resources independent of the Reich’s finances. Somary’s reading of the four Berlin banks’ 1920 accounts sharpens the point: approximately three-quarters of liabilities fell due within seven days, while roughly half of assets consisted of government finance bills. Interposing commercial banks between the Treasury and monetary expansion added the expense of a decentralized apparatus without supplying a corresponding economic advantage.
Meanwhile, the spread of cheque transactions accelerated branch development and displaced looser banking groups. Somary reports that seven Berlin institutions held more than 90 percent of outside funds. He leaves open whether competition among a few large banks, already coordinated through agreements on business terms, would culminate in monopoly. The revival of private banking after 1919 offered little counterweight because it concentrated on foreign-exchange and securities commissions rather than deposit gathering. Higher administrative costs and cartel power made credit more expensive for borrowers.
Inflation also widened the discrepancy between nominal scale and underlying capital strength. Own capital lagged far behind expanding liabilities, potentially allowing control over major credit institutions to be acquired with relatively little capital. Abroad, sequestration, severed affiliations, and currency weakness dismantled much of the prewar network; replacement operations remained constrained and provisional.
Somary’s conclusion is nevertheless qualified. Expansion through existing institutions rather than new bank formations appeared comparatively healthy, although its survival under deflation remained uncertain. Investment lending and advice on wealth management had revived, and banks retained influence over important industrial groups, often with scant regard for independent shareholders. The contribution’s lasting analytical force lies in separating organizational concentration and accounting growth from economic service, autonomous liquidity, and financial resilience.
This work was divided into 3 sections when it entered the library's research corpus—an apparatus for search and citation, not necessarily the author's own table of contents. Each title opens its summary.
Put a question to this work; the Librarian answers from its 3 sections and cites the passage.
Ask the Librarian