• Germany edition
 
Bank rules will shield consumers from risk
Photo: DPA

Bank rules will shield consumers from risk

Published: 06 Feb 2013 14:40 GMT+01:00
Updated: 06 Feb 2013 14:40 GMT+01:00

The German government on Wednesday unveiled tougher new banking rules which it hopes will help prevent financial crises in the future and make banks bear more of the responsibility themselves.

"We know that the exaggerated de-regulation (of the financial markets in the past) was a mistake," Finance Minister Wolfgang Schäuble told a news conference when presenting the draft law.

"We allowed ourselves to be dazzled by technical innovation, new financial products and breathless developments on the financial markets," he said.

But in the wake of the financial crises, Germany had come to the realisation that "no financial market, no financial player and no financial product must be allowed to escape supervision," Schäuble said.

"If you want the chance to make a profit, you must also shoulder the risk," and the taxpayer should not be expected to foot the bill, the minister said.

"We're establishing step by step a new regulatory framework for the financial markets," he said.

Under the new legislation, which Schäuble said he hopes to have passed by parliament by June, large banks will have to separate their different areas of activity in order to protect customers' deposits from riskier areas of operations.

The rule will apply to institutions where high-risk operations such as high-frequency trading or hedge-fund financing make up either 20 percent of the balance sheet value or surpass €100 billion ($135 billion) in value.

The banks concerned will be required to transfer their risky businesses into legally and financially separate units.

Schäuble estimated that between 10 and 12 banks in Germany fulfil these criteria and would therefore be affected.

He declined to name any, but the rules will certainly affect the country's two biggest banks, Deutsche Bank and Commerzbank, as well as regional banking giant Landesbank Baden-Württemberg (LBBW).

The law also requires banks to draw up so-called "wills" or emergency plans for restructuring or winding down once they get into financial difficulty.

High-level managers and executives will face up to five years in jail if they are found guilty of neglecting their risk management duties and allowing their company to run into trouble.

The legislation would directly tackle the shortcomings that make the financial system vulnerable to crisis and also tackle the "lack of responsibility on the part of banks and bankers," Schäuble said.

Banking separation is an idea promoted by the head of the Finnish central bank and European Central Bank governing council member Erkki Liikanen as a measure for reducing risk in the banking sector.

France has also drawn up similar legislation and Britain, too, is mulling an overhaul along similar lines.

But a Europe-wide process would likely take years, so Germany was seeking to provide added impetus by pressing ahead with its own national legislation now, Schäuble argued.

Nevertheless, the banks themselves are fiercely opposed to the changes.

Deutsche Bank has repeatedly slammed the idea as harmful both to the German economy and German companies.

It argues that if it can no longer use deposits to support its activities in investment banking, refinancing costs would automatically rise and that would narrow the financing possibilities of major companies.

The BdB German banking federation agreed.

"The draft legislation will undermine Germany as a financial centre," complained BdB president Andreas Schmitz.

"The measures approved by the cabinet today are folly," he said, slamming them as cheap populist moves by politicians with an eye on the general election this September.

"There is no evidence that separating off trading activities will lead to greater stability on the financial markets," Schmitz argued.

Instead of rushing ahead with its own unilateral national regulatory measures, Germany should wait for new rules to be established at a European level, he said.

AFP/hc

The Local (news@thelocal.de)

Don't miss...X
Left Right

Your comments about this article

02:05 February 7, 2013 by US-TommyBoy
I don't need a shield from bank risk, I need a shield from crooked, corrupt bankers.

The LIBOR bunch is a classic example.
18:52 February 12, 2013 by raandy
Tommy Boy I agree the banking institutions are now all about risky investments with high profit potential and BIG bonuses for the top echelon.

What ever happened to the rules that use to prevent this audacious behavior from our financial institutions?
Today's headlines
Minister's jet grounded twice in a month
Foreign Minister Steinmeier reboards his plane after the delay. Photo: DPA

Minister's jet grounded twice in a month

German Foreign Minister Frank-Walter Steinmeier had to wait for two hours on a runway on Wednesday night due to a technical glitch on his plane - the second problem the jet has had in a month. READ () »

German of the Week
'It's important people are confronted with cancer'
Photo: Marina Proksch-Park

'It's important people are confronted with cancer'

Images of children with cancer often evoke weakness and defeat. But Marina Proksch-Park shows them enjoying life. The photographer who has sparked an online campaign with her pictures is The Local's German of the Week. READ () »

CDU candidate forced to remove Turkish logo
Yasar Calik. Photo: Facebook/Yasar Calik

CDU candidate forced to remove Turkish logo

A Christian Democrat (CDU) town council candidate has apologized and withdrawn campaign bags on which he had printed a new party logo where the Turkish crescent appeared inside the "C" for Christian. READ () »

Cheap flights get pricier as airlines expand
Lufthansa's daughter company Germanwings is one of the faster-growing budget airlines in Germany. Photo: DPA

Cheap flights get pricier as airlines expand

Budget airlines are expanding their range of routes from Germany but ticket prices are climbing along with them, a report from the German Aeronautics Centre (DLR) revealed on Thursday. READ () »

Ecclestone lawyers: Bribes never happened
Bernie Ecclestone with his lawyers in a Munich court on Thursday morning. Photo: DPA

Ecclestone lawyers: Bribes never happened

UPDATE: Formula One supremo Bernie Ecclestone went on trial in Germany on Thursday, denying charges of bribery that threaten to land the British billionaire in jail. READ () »

Minister praises Erasmus 'success story'
Photo: DPA

Minister praises Erasmus 'success story'

A revamped version of European student exchange programme Erasmus officially launched in Berlin on Thursday with Germany's education minister praising the scheme as a Europe-wide “success story”. READ () »

Turkey tourists lose call to prayer refund bid
Photo: DPA

Turkey tourists lose call to prayer refund bid

A German couple has lost their legal fight to get a refund for a Turkish holiday which they said was ruined by the calls to prayer from a nearby mosque. It is just one of a series of court claims by picky German tourists. READ () »

Germany halts arms sales to Russia
Russian troops surround a Ukrainian base in Crimea. Photo: DPA

Germany halts arms sales to Russia

Germany has stopped selling arms to Russia due to the current “political situation”, according to reports on Thursday. The sale of military equipment to Russia by German firms has been criticized by the country’s Nato allies. READ () »

Truck kills man lying in middle of road
Photo: DPA

Truck kills man lying in middle of road

Police were searching for witnesses on Wednesday morning following a mysterious road accident in which a 25-year-old man was killed as he lay in the middle of the road. READ () »

Where are Germany's smartest towns?
Germany's cleverest town. Photo: DPA

Where are Germany's smartest towns?

A brain training website released scores on Wednesday showing which German towns performed best and worst in a range of cognitive tests - with some surprising results. READ () »

RECEIVE OUR NEWSLETTER AND ALERTS
Photo: DPA
National
Germany sold €40 million of arms to Russia
Photo: DPA
National
Girls find live ammunition in Easter bonfire
Photo: Facebook/screenshot
Berlin
Germany's most viral advert for an apartment?
Gallery
11 things you need to know about German beer
Photo: DPA
Politics
Interview with AfD - 'If Britain goes, Europe is lost'
Photo: DPA
National
Police damage own water cannon with eggs
Photo: DPA
National
Let us start work later after World Cup nights, unions says
Photo: DPA
Society
Crystal meth use hits record level
Photo: DPA
Rhineland
Elderly man taped €200,000 to his genitals
Photo: DPA
Business & Money
What's the unemployment rate in your area of Germany?
Photo: Galerie Bilderwelt
Gallery
World War I in colour photos
Photo: DPA
Society
JobTalk: Why you should teach English in Germany
Advertisement:
Photo: DPA
National
330,000 sign up against TV licence fee
Photo: Submitted
Frankfurt
'I'll get even with my old pal Schwarzenegger'
Photo: DPA
Gallery
Ten great inventions you (probably) didn't know were German
Photo: J. Arthur White
Berlin
Clashes in Berlin as refugees tear down their own camp
Photo: DPA
Gallery
The 10 best German employers to work for
CurrencyFair
Sponsored Article
Why it pays to avoid banks when making overseas transfers
Mr. Lodge
Sponsored Article
How to find a furnished rental in Munich
Sponsored Article
How to make a lasting impression in business
Photo: DPA
Society
Nine jobs you can only do in Germany
Photo: DPA
Business & Money
JobTalk: All you need to know about working in Germany
Photo: DPA
Features
The Local List Archive - Your guide to all things German
National
Share news tips with The Local Germany
Latest news from The Local in Switzerland

More news from Switzerland at thelocal.ch

Latest news from The Local in Spain

More news from Spain at thelocal.es

Latest news from The Local in France

More news from France at thelocal.fr

Latest news from The Local in Italy

More news from Italy at thelocal.it

Latest news from The Local in Norway

More news from Norway at thelocal.no

Latest news from The Local in Sweden

More news from Sweden at thelocal.se

3,077
jobs available
Toytown Germany
Germany's English-speaking crowd