Without such convergence the monetary policy stance of the ECB is likely to be inappropriate for the country, and it may face a risk of excessive output volatility leading potentially to a series of boom-bust cycles as the country lacks important tools to stabilise economic conditions at home.
On the whole, however, it has thankfully not triggered a mass exodus of foreign banks from Germany – unlike in some other countries. For a long time, foreign banks struggled to gain a foothold in the German market. Banks that accept deposits and grant loans normally had to begin by setting up a branch network as a prerequisite for winning new customers.