Association of German Banks on bank levy and restructuring law
25 August 2010 - The Association of German Banks has issued the following statement on the draft bill adopted today by the German cabinet outlining a procedure for restructuring financial institutions and for a corresponding restructuring fund:
If dangers to the stability of the financial system are to be better averted in future, it must be possible to reorganise ailing banks at an early stage and also, where necessary, wind them up. The draft bill adopted today by the German cabinet is a step in the right direction. Not individual financial institutions but the financial system will be protected.
We nevertheless have reservations about the limitation of the crisis management measures to financial institutions. The procedure should be able to accommodate a range of situations and market participants. Since hedge funds and insurance companies, for example, benefit just as much from stabile financial markets as do financial institutions, the scope of the legislation should be broadened.
Our association 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/early January 2011 although the European Commission has announced it will propose legislation of its own in spring 2011. It would be more appropriate, in our view, to put forward the draft plan in discussions at EU level. 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. Firms must, moreover, 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. It is therefore both important and right to place a ceiling on contributions to the restructuring fund. The suggested figure of 15% of the previous year's net income is too high, however, and a minimum levy on firms which have made a loss would be inappropriate.
