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How significant is the alleged unfair advantage enjoyed by state-owned banks in Germany?



The European Commission argues that the state-owned banks in Germany enjoy an unfair advantage over the private sector banks in the cost of borrowing funds in the financial markets because of state guarantees that public sector banks are perceived to enjoy. This note demonstrates that the blame for the comparatively poor profitability of private sector banks in Germany cannot be laid at the door of the relatively cheaper funds that the public sector banks can raise in the wholesale markets. Copyright 2006, Oxford University Press.

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