At first glance, German banking is in decent shape. Set within eurozone’s healthiest economy, the country’s three pillar banking system, once condemned as stodgy and old-fashioned, looks a smart way of guaranteeing diversity of lenders and ensuring nationwide coverage. Two pillars (or at least one and a half) are performing strongly, while the third is headed by a genuine national champion. But weak capital, declining margins, higher funding costs, a growing regulatory burden and a hostile political environment cloud an otherwise benign picture, reports Julian Lewis.
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