What explains Sparkassen's remarkable staying power? How have these small independent credit institutions managed to weather the turbulent storms that led to the transformation, consolidation, or elimination of similar credit institutions in other countries? This chapter turns to economics to explain Sparkassen's resilience.

Much of our understanding links the success or failure of banking to the national or global economy. Greater globalization in trade and finance, for example, is often cited as a causal factor in the demise of community banks and the rise of banks so large they are too big to fail. National depressions, recessions, and economic booms are often linked to transformations in banking. In the case of Germany, the so-called “economic miracle” during the 1950s and 1960s generated significant productivity, much of it fueled by the expansion of Sparkassen lending to firms and individuals (Edwards & Fischer 1996). Since the 2007/08 financial crisis, Germany's economy went from “the sick man of Europe to Superstar” (Dustmann et al. 2014), also fueled in large part by bank loans, which originated with Sparkassen. Macroeconomic explanations, however, beg the question as to why Germany's savings banks survived even as public savings banks in other advanced industrialized countries that experienced similar economic growth did not. Macroeconomic accounts also fail to explain why, particularly in recent years, savings banks performed better than Germany's two other pillars – cooperatives and commercial banks. While all banking is affected by national and global events, for Sparkassen, local economic factors play a central role in their survival.

Given their “boring” business model – taking deposits and making loans – Sparkassen's staying power is a function of the economic value banks provide their local customers, particularly firms. This chapter explores Sparkassen's value-added to local economies and the relationship between bank performance and the financial health of a region.