Sparkasse, the German savings bank cited by Kim Yong-beom, chief of the Presidential Office's policy planning, as producing different outcomes from Korea's "cruel finance," holds the largest share of Germany's private housing finance market. In Germany, large commercial banks focus on corporate finance and investment banking, while savings banks and cooperative banks broadly handle household and regional small-business finance. Sparkasse has built a relationship-banking model that supplies funds to local residents and small and medium-sized enterprises (SMEs) on the stable foundation of mortgage lending.
According to the financial industry on Wednesday, Germany's private housing finance loan balance stood at 1.1164 trillion euros, or approximately 1,907 trillion won, as of the end of 2024. Sparkasse held the largest share at 35.1%, followed by cooperative banks at 29.8%, while large commercial banks, including Deutsche Bank, accounted for just 18.9%. Regional financial institutions thus form a larger pillar than commercial banks in the housing finance market.
Germany's banking system is described as a "three-pillar structure" comprising commercial banks, savings banks and cooperative banks. While commercial banks primarily handle large corporate lending and capital markets, savings banks and cooperative banks broadly cover household and SME finance within their regions. Savings banks and cooperative banks provide everyday and regional finance to local residents, self-employed workers and small businesses. Sparkasse is a public-interest savings bank in which local governments participate in establishment and supervision. Its structure prioritizes financial access and regional economic support over profit maximization.
Sparkasse provides a full range of financial services at the regional level, including deposits, loans and foreign exchange. Rather than a specialized financial institution, it functions as a comprehensive financial company used daily by local residents — effectively a "regional universal banking" model. As of April this year, 339 Sparkasse institutions operate across Germany with about 11,000 branches. Its customer base of roughly 50 million means around 60% of Germans use Sparkasse.
Sparkasse's competitiveness lies in a structure that keeps money circulating within the region. It provides mortgage loans based on local residents' deposits, then channels the stable earnings back into lending to individuals and to regional SMEs known as the "Mittelstand." While figures vary by region, Sparkasse's current mortgage rates range from roughly 3% to 4% a year. Housing finance serves not merely as a retail lending product but as both a revenue base for regional financial institutions and a foundation supporting SME finance.
The same characteristic shows up in the corporate lending structure. Long-term loans account for about 78.5% of corporate lending at Sparkasse and other German savings banks, while short-term loans make up just 9.7%, falling short of 10%. This reflects an approach that assesses borrowers' businesses and repayment capacity through long-term relationships rather than focusing on short-term profitability. "When regional financial institutions handle deposits, mortgage loans and SME loans together, they can gauge customers' transaction history and repayment capacity over long periods," an industry official said. "This universal banking structure provides a foundation for managing both interest rates and soundness."
By contrast, Korea's mortgage market is heavily concentrated in large banks. As of the end of last year, deposit banks held 65.9% of domestic mortgage loans, while savings banks and mutual finance combined accounted for just 11.4%. This explains why regional and grassroots financial institutions are said to lack a stable revenue base even when they seek to expand relationship banking. "In Germany, savings banks contribute to households and regional economies on the stability secured from mortgages, but in Korea, banks take most of the housing finance, making it difficult for grassroots financial institutions to play their role," another industry official said.
France also shows a high share of cooperative financial institutions in housing finance. Crédit Agricole, Crédit Mutuel and BPCE, France's three major financial cooperatives, held a combined 77.4% of the real-estate mortgage market in 2021. Regionally based financial firms handle a substantial portion of housing finance, in contrast to Korea, where savings banks and mutual finance account for only the low teens.
Similar cases can be found in other countries. At Spain's large credit cooperative Eurocaja Rural, housing-related loans accounted for 61.4% of its total loan portfolio as of the end of last year. Navy Federal, the largest credit union in the United States, reported a mortgage portfolio of $84.3 billion in 2022, far exceeding $2.5 billion in secured loans and $3.5 billion in unsecured loans. "In Japan as well, many households borrow from regional banks rather than mega-banks," an industry official said. "This is because regional financial firms have built a cycle of deposits and loans based on relationship banking."
Still, some caution that the Sparkasse model cannot be directly applied to Korea. Sparkasse differs institutionally from Korean savings banks or mutual finance in that it is a public financial institution in which local governments participate in establishment and supervision. Its credit loan rates also range up to around 15% to 17% annually. The key, analysts say, is not whether to create new financial institutions but how to divide roles across sectors and build sustainable revenue structures for regional financial institutions. "Korea could also discuss establishing separate financial institutions led by the public sector or local governments," an official at a non-bank financial institution said. "But as seen in the case of internet-only banks, without a clear division of roles across sectors, the same problems will recur even if new institutions are created."
