Typically, the next important activity after financial advisory services (translating investment plans into financial plans) is the scrutiny of a firm's infonnation system, as this is part of the bank's know-how. Another obvious area is the financial part of mergers and acquisitions. When the bank's own expertise reaches its limits, the usual step is to call in an auditing or consultiung firm, always provide J the managemes. agrees to such measures.<sup>7</sup> Thne move o; banks to have their own consultini, firms is a very recent move in Germany, and has litde to do with the historic perfumrance of the German banking system, but I was also surprised to leam that orne large bank had oily two years ago institutionalized meeting the demand for consulting and advisory services by creating a separate division only for that t,ak.8 The answer lies in the traditional procedure to employ outside agents for the consulting and analyzing activity. Every banker interviewed was ready to admit that in the bank there was certainly no expertise on the individual product markets, and with all that has been said above, this cannot be efficient, as it would be analogous to a planned economy. Also today, product related topics are not part of bank consulting, but we meant to have shown in this section that more detailed analyses of client firms, triggered by signals from accounting data, often end up to be indistinguishable from copsulting activities. Again, this feature is especially important in the lending activities of German banks to firms in the Mittelstand.

# 2.4. Banks' involvement **in the Boards of client frums: a US** - **German comparison**

'While consulting and advisory activities are a control device of intermediate intensity, as they show features of both information acquisition as well as information provision to improve the quality of decisions, banks can also send members to the Boards of client firms with the result of greater possibilities to actively influence the decision-making process in the firm's management. This is the ever lively debate on the power of German banks.<sup>9</sup> We do not intend to diminish the potential power that German bankers hold in large firms through the companies' Supervisory Boards (Aufsichtsrate), but a number of qualifiers are necessary to assess the true dimension of the scope of influence by the banks.

The first qualifier to be inserted has already been provided in Harm [18]. It was shown there that the share of AG's in the domestic revenues accounted for approximately 21%. The AG is the only corporate form that is legally required to have an Aufsichtsrat 71t should be clear that in a situation of financial distress, which triggered the bank's demand for more information in the first place, the bank has a lot of leverage to force such a measure on the manager of the firm.

'One employee there stressed the notion that it was a move by his bank away from collateral and towards creditworthiness lending. That this happened only two years ago shows something about the nature of the banking industry.

9See for example Greiffenberg [16], Herrhausen [22], Huffschmid [24], Der Spiegel [10,12], and Industriemagazin [26].

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