Bank wills should relieve taxpayers in times of crisis

Bank wills should relieve taxpayers in times of crisis

A spokesman for the federal ministry of finance confirmed a report to that effect in the "suddeutsche zeitung" on saturday. "We want to move forward," he said, referring to the lack of european regulations.

According to the newspaper, a bill is being prepared in the finance ministry, and the law is to come into force before the 2013 parliamentary elections. The supervisory authority bafin has already sent a circular to the major banks asking them to comment on the plans. In the U.S., wills are already required for rough money houses.

According to the european commission, eu countries had to provide about 1.6 billion euros between 2008 and 2010 to save financial institutions from collapse. The fear was that even the bankruptcy of a single major bank could lead to the collapse of the world financial system due to its global network.

About ten institutions were affected by the introduction of the "bank wills", including deutsche bank, commerzbank, DZ bank and some landesbanken, writes the "suddeutsche zeitung" newspaper. According to the plans, the geldhausers first had to draw up a restructuring plan and submit it to bafin for approval. It must show how the individual areas of the bank are networked, which of them are systemically relevant, what risks lie dormant in each department and subsidiary, and how the management board intends to obtain additional capital in an emergency.

The supervisory authority itself is also drawing up a resolution plan for each institution, according to the report. In the event of a crisis, this fund should show which areas are so important that they must be continued, which can be closed and how this would affect other institutions. In addition, it will be determined how customer deposits can be secured and how the closure or partial closure of the bank can be financed without taxpayers’ money.

Green finance expert gerhard schick stressed the need for a european bank restructuring fund fed by a european bank levy. Without such a european structure, a realistic emergency plan for cross-border institutions could not be established. They are simply too coarse for purely german collection schemes. A european bank fund is therefore in germany’s interest, and further delays by the federal government are unacceptable.

The deputy leader of the left-wing parliamentary group, sahra wagenknecht, spoke of a "paper tiger". People were to be offered the prospect of decisive action in the federal election campaign. Those who really want to protect the taxpayer should not draw up half-hearted plans for the worst-case scenario, but prevent the worst-case scenario by prohibiting the banks’ gambling by law.

In the U.S., about 125 banks are required to submit a detailed contingency plan by the end of 2013. The major institutions, including deutsche bank, have already had to submit their documents to the local supervisory authorities. The "bank wills" are a central component of the financial market reform pushed by U.S. President barack obama.

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