andreas dombret : the cake's getting smaller. consolidation and reorientation in the german banking sector speech by dr andreas dombret, member of the executive board of the deutsche bundesbank, at the frankfurt school of finance & amp ; management's fifth annual conference on integrated performance and risk management, frankfurt am main, 30 march 2017. * * * 1 introduction ladies and gentlemen thank you for inviting me to speak at this conference on integrated performance and risk management. the close ties between the deutsche bundesbank and the frankfurt school of finance & management have already become something of a tradition, and i hold them in high regard. the speech i am holding today is entitled “ the cake ’ s getting smaller – consolidation and reorientation in the german banking sector ", and you may be wondering what managing a credit institution has in common with this city ’ s famous cake, the frankfurter kranz … well, both are crowning achievements in their respective professions : the frankfurter kranz, invented here in frankfurt am main in 1735 by an unknown baker, is part and parcel of this city ’ s history in the 18th century. shaped like a wreath – kranz in german – it symbolises the emperor ’ s crown. unsurprisingly, then, it takes a great deal of skill and craftsmanship to prepare. similarly, managing a credit institution has emerged as one of the elite disciplines in the business world. steering an institution, with all the tasks that entails, has become far more gruelling in recent years – not just because market conditions have become harsher, but also because the cake that can be divided up in the first place has shrunk in size and is continuing to do so. and when the going gets tough, there ’ s no option but to tweak the recipes. 2 the cake ’ s getting smaller the cake that can be divided up among germany ’ s banks and savings banks has been shrinking for many years now. just look at how earnings have been contracting for more than 15 years – the figure for 2015 is nearly 30 % down on 1999. this malaise can be traced back to a number of factors. one is that europe, and germany especially, are often lambasted for being “ overbanked ". unless these overcapacities are reduced, they will continue to take their toll on earnings. the low - interest - rate environment is having much the same effect. we are already

earlier this year, i heard from a rancher, a manufacturing consultant, and the head of a nursing school at one of these events. 1 / 6 bis - central bankers'speeches today, it's widely accepted that clear communication contributes greatly to the effective transmission of monetary policy, especially because clear communication can affect the expected path of interest rates and financial conditions more generally. loretta, in one of her speeches, describes very well the role of central bank communication : " the public will have a better understanding of monetary policy when policymakers are clear about their policy goals, those aspects of the economy monetary policy can and can't influence, and the economic information that influences their forecasts and policy decisions " ( mester, 2018 ). she went on to explain that when policymakers are systematic in their policy responses to changing economic conditions, the public will have a better idea of how the committee's monetary policy is likely to change in response to anticipated and unanticipated economic developments. in particular, she noted : " with such knowledge, households and firms can plan better ; they can make better saving, borrowing, investment, and employment decisions " ( mester, 2018 ). the evolution of federal reserve communications the view reflected in loretta's words seems commonplace now, but it wasn't always so. when loretta joined the federal reserve bank of philadelphia in 1985, the fomc didn't disclose its interest rate decisions. it didn't even report that it had made a decision. in 1981, karl brunner, the swiss monetary economist, called central banking an esoteric art and lamented central banks'" inherent impossibility to articulate its insights in explicit and intelligible words and sentences " ( brunner, 1981 ). at the time, central banking wisdom dictated that monetary policymakers should say as little as possible. some research of that vintage tried to rationalize this " secrecy " through the notion that monetary policy would be particularly effective if it surprised markets. 2 in the 1990s, central bank communication changed dramatically. in 1993, the fed started to publish fomc meeting minutes in their current form, and in 1994, it began releasing fomc meeting transcripts with a five - year lag. in february 1994, the fed started to publish post - fomc meeting statements following meetings at which there was a change in the intended federal funds rate. in may 1999, the fomc started to publish statements after every meeting