This article shows how a decades-long investigation into the German banking sector culminated in the 1934 Banking Law. Existing accounts trace its origins to the 1931 financial crisis or the 1933 Nazi seizure of power. Yet prior to the First World War, concerns over Germany’s dependence on foreign capital had compelled officials to discuss the prospect of financial-sector supervision, while their efforts to improve levels of liquidity in the banking sector heightened by the 1920s. The construction of a regulatory policy in Germany thus arose from a protracted debate over state intervention, thereby reflecting the interdependence between politics and finance.
Using archives from central banks, national governments, and international organizations in four countries, this article seeks to identify the rationale, both economic and political, that underpinned the state’s regulatory policy. To do so, it shows the international dimension to regulation. Government officials frequently criticized other countries for exacerbating banking volatility—and, by extension, threatening national security—factors which further accelerated the process of regulation at home. As contemporaries viewed, globalization had appeared to threaten to break the German banking system.
The broader implication of this research is to show the complex relationship between finance and the state. Banking regulation, indeed, proved more difficult than simply imposing a standard set of rules on the entire financial sector. It was a deeply politicized project, subject to numerous debates on state involvement and public law. The German case is particularly compelling because officials even considered the extent to which a supervisory authority needed to be independent from the government itself. At the same time, there was often tension between these views and those that remained committed to classical-liberal principles of a limited state. From industrialists on government commissions to the prominent bankers in Berlin, interest groups delayed the institutionalization of a direct state intervention.