31 August 2010

AGB issues statement on bank levy and Restructuring Law by German Cabinet

To protect the financial system as a whole, the German Cabinet has adopted a draft bill that makes it possible to reorganise ailing banks at an early stage and wind them up where necessary.

Though they express reservations on the limitations of crisis management measures to financial institutions, the AGB believes the procedure should be able to accommodate a range of situations and market participants. Since the hedge funds and the insurance companies, for example, benefit just as much from stable financial markets as do financial institutions, the scope of the legislation should be broadened.

The AGB is also critical of the haste with which the draft bill is being moved forward. The rules are scheduled to become effective at the end of December 2010 or early January 2011, although the European Commission has announced that it will propose legislation of its own in spring 2011. It would be more appropriate to put forward the draft plan in discussions at EU level and see whether  this is the only way to avoid competitive distortion and potential double burdens caused by national "rescue funds".

The crisis clearly showed the need for internationally coordinated crisis management, but firms must also be able to sustain the combined burden of all the various rules and regulations, such as higher capital and liquidity requirements or additional rules on deposit guarantees. AGB commends the  placing of a ceiling on contributions to the restructuring fund, but disagrees with  the suggested figure of 15% of the previous year's net income for being  too high, as well as the minimum levy on firms which have made a loss.

© BDB - Bundesverband Deutscher Banken