Germany’s misfiring banking system faces capital conundrum

The country’s banking system had a bad crisis. Cheap funding, overcapacity and poor business models led too many banks to buy rogue assets. But as it returns to health, is there now a shortage of capital to fund needed consolidation?

Walking through the über-chic Mitte district in the old east of Berlin trying to find somewhere quiet for a conversation is a challenge. The pavements are crammed with tourists flocking to see the Brandenburg Gate and Norman Foster’s domed Reichstag. The coffee bars and hotels buzz with conversations about commerce and affairs of state. Germany is not just reunited, it is the confident and swaggering political and economic nexus of continental Europe.

The problems and protests on the eurozone periphery could not seem further away.

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