SHARE
COPY LINK

FINANCIAL CRISIS

Steinbrück says bankers should pay for crisis

Bankers should stump up for the consequences of the global financial crisis, Germany's finance minister said to his G20 counterparts in an letter obtained by AFP on Monday.

Steinbrück says bankers should pay for crisis
Photo: DPA

“The broad majority of our citizens who are not among those responsible for the crisis – now face enormous financial burdens,” Peer Steinbrück said in the letter dated August 27.

“It is therefore of central importance that we arrive at a fair distribution of the burdens arising from the crisis and, in particular, that we enlist those who triggered the crisis in the financing of these burdens as well,” he said.

“I would like to discuss with you how we can bring the financial markets to make a greater, internationally coordinated contribution to financing the immense burdens of the crisis.”

Steinbrück also said that he wants the G20, whose leaders are to meet for a summit in the US city of Pittsburgh on September 24-25, to take a “global approach” to do more to keep a lid on bankers’ bonuses.

“Excessive bonus payments, of the type that we have again seen recently, make it very plain that we need to take action,” he said. “These payments can scarcely be defended at a time when the financial system through the world has only survived thanks to huge levels of government support.”

He called for a cap on the share of bonuses in bankers’ pay packages, for stock options to be held for a minimum of four years, for a clear link between the pay of top management and a firm’s performance and for salaries to be published.

The issue of bonuses was expected to come up in talks later on Monday in Berlin between German Chancellor Angela Merkel and French President Nicolas Sarkozy.

Sarkozy, who has sought to position himself as a champion of financial regulation, said last week he would propose in Pittsburgh “a strengthening of sanctions towards banks that do not play by the rules.”

Last week Merkel said that she “of course” agreed with Sarkozy’s proposals, saying she was “angry that some banks are starting over again just like before.”

“This presents risks and this is why we should consider how we can intervene and limit” the bonuses, Merkel added, saying the issue would be a “central theme” in Pittsburgh.

Steinbrück also called on finance ministers to discuss international rules to facilitate the insolvency and liquidation of large banks in the event of another crisis.

He also said he would press for better international coordination on “exit strategies” from the massive stimulus efforts unrolled by governments around the world in order to avoid damaging inflationary effects in the longer term.

Steinbrück said as well that the G20 should also work towards a “clear and binding commitment” to reduce the huge deficits that have been built up in fighting the global recession.

He said efforts to reform financial regulation following G20 summits in Washington in November and in London in April were “encouraging” so far, for instance with closer supervision of rating agencies and hedge funds.

But he warned: “Now we must continue resolutely down this path, together resisting the temptation to return to business as usual at the first faint signs of recovery.”

Member comments

Log in here to leave a comment.
Become a Member to leave a comment.

BANKING

German online bank N26 shutters US service

German online bank N26 said Thursday it was closing its operation in the United States next year, as regulators in Europe place the "fintech" start-up under increased scrutiny.

The N26 logo on a bank card.
The N26 logo on a bank card. Photo: picture alliance/dpa | Christophe Gateau

N26’s 500,000 customers in the US would be able to use their services until January 11th, 2022, the bank said in a statement, after which it would cease to operate in a market it first entered in 2019.

Instead the Berlin-based operation would “sharpen its focus on its European business”, where it already operates in 24 countries and is exploring expansion into more eastern European markets.

N26 said it would also look to launch new “investment products in the coming year” to sit along side its current account service.

Founded in 2013, N26 offers free, online-only banking services to around seven million clients and is one of Germany’s most high-profile financial technology or “fintech” firms.

In October, the bank raised $900 million from private investors, and announced a plan to hire a further 1,000 employees to reinforce its product development, technology and cybersecurity teams.

READ ALSO: German online bank N26 to create 1,000 jobs

At home, N26 has been in the crosshairs of the German banking watchdog BaFin since 2018 after a local news media investigation found that it was possible to open account with forged IDs.

Earlier in the month, the regulator said it was upping its oversight operations at N26, appointing a special representative to monitor the bank’s progress towards solving issues in “risk management with regard to IT and outsourcing” identified by BaFin.

The regulator also limited the number of new customers N26 could take on to 50,000 a month until the shortcomings were addressed.

N26 was already being monitored by BaFin over failures in the start-up’s anti-money laundering system.

BaFin issued N26 with a 4.25-million-euro ($4.8-million) penalty earlier this year in connection with around 50 “suspicious transactions” the bank failed to report promptly enough.

SHOW COMMENTS