The German corporate governance system has long been cited as the standard example of an insider-controlled and stakeholder-oriented system. We argue that despite important reforms and substantial changes of individual elements of the German corporate governance system, the main characteristics of the traditional German system as a whole are still in place. However, in our opinion the changing role of big universal banks in governance undermines the stability of the corporate governance system in Germany. Therefore a breakdown of the traditional system leading to a control vacuum or a fundamental change to a capital market-based system could be in the offing. Copyright Blackwell Publishing Ltd 2005.