Strong regions: How local banks make companies flourish!

Strong regions: How local banks make companies flourish!

In a recent statement, Finance Minister Professor Dr. R. Alexander Lorz the crucial role of regional banks for economic dynamics in Germany. These banks not only offer financial stability, but also a close connection to local people and businesses. Small and medium-sized companies in particular benefit from individual financial support, which is essential for their growth and innovations. Lorz emphasizes that a balance is necessary between the regulatory requirements and the ability of these banks to act in order to fulfill their important function.

He also sees the urgency of modern banking regulation that takes current needs into account. This is particularly relevant given the challenges regional banks face as economic changes occur. Volksbank Mittelhessen, represented by its board spokesman Dr. Lars Witteck, thanks the state government for its commitment and emphasizes the responsibility of these banks for regional development.

Importance for medium-sized businesses

Regional banks play an important role as the first point of contact for medium-sized businesses. They offer tailor-made financing solutions that are tailored to the needs of local companies. In addition, Volksbank and Raiffeisenbank rely on a nationwide presence instead of only making their offerings available online. These banks see themselves as lifelong companions for their customers and continually adapt their services to their respective requirements.

Another area in which regional banks are active is supporting non-profit institutions and volunteer work. Through funding competitions, they invest 1.3 million euros annually to support local projects. Hesse pursues the goal of efficient and practical banking regulation at national and European levels. Avoiding so-called gold plating is intended to reduce bureaucracy for regional banks and strengthen their competitiveness.

Current challenges and outlook

In 2023, the regional banks were able to achieve record profits, which is largely due to the change in interest rates, which favored the passive contribution. The positive business results are expected to continue into 2024, despite the current recession and rising corporate bankruptcies leading to increased loan defaults. The Bundesbank reports an increased need for value adjustments in the lending business, which brings additional challenges for regional banks.

It is crucial that banks critically examine their strategies in order to adapt to the European Central Bank's renewed interest rate turnaround and to ensure long-term success. The business model analysis, which was implemented as part of the new regulatory requirements, forces banks to systematically examine their business models. This includes identifying weak points and vulnerabilities within your business strategies.

A future-oriented approach is particularly important as BaFin and the Bundesbank will continue to focus on governance and business models in the coming years. The business model analysis is carried out in three phases: First, an overview of the institute is created, followed by the identification of key focus areas and the assessment of the business environment. This analysis includes both quantitative and qualitative aspects and makes a decisive contribution to the sustainability and competitiveness of banks.

The next regional bank conference is expected to take place in 2026 at the Hessian state representation in Brussels, where the interests of the regional banks will continue to be represented. Current developments show once again how indispensable regional banks are for the economic stability and development of their regions.

For further information visit Hesse and BankingHub.