Germany unveils plans for bank fund, welcomed by France

10:25, April 01, 2010      

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The German cabinet Wednesday approved plans to make banks pay a levy for an emergency fund, preparing for another possible financial crisis, which was applauded by visiting French Finance Minister Christine Lagarde.

German Finance Minister Wolfgang Schaeuble told a press conference after the cabinet meeting that related financial institutions will pay 1 billion to 1.2 billion euros (about 1.62 billion dollars) in total every year for a special rescue fund, which would be used to cover the bailout packages when "systematic risks" threaten the credit markets.

Fees will be based on banks' balance sheets, excluding customers' deposits, and the amount varies in terms of banks' size and influence in the financial system, Schaeuble said.

The government is to complete the detailed law by this summer, the minister said. He hoped the draft bill could pass through the parliament "fairly quickly."

The proposal also seek to give the government authority to consign the systematically relevant parts of a troubled bank to a commercial third party or to a state-owned "bridge bank," with an aim to prevent further turbulence in financial markets.

French Finance Minister Christine Lagarde, who attended the German cabinet meeting as a guest, said Paris was also considering the possibility of introducing a special tax for the financial sector to avert possible crises.

Unlike Germany's bank levy plan, France prefers a tax on banks, which can be used to reduce the budget deficit, a French government official said Tuesday.

Despite the different crisis-prevention methods, Germany and France, two leading economies in Europe, seemed determined to jointly move forward policies for curbing speculation and preventing future crises in a broader field.

"We strongly welcome today's decision of the German government to introduce a legal framework for effective bank restructuring as well as a stability fee as a levy differentiating for systemic risk," the French and German governments said in a joint statement.

The statement stressed that "France and Germany will actively support the implementation of bank resolution mechanisms and systemic risk levies" in the euro zone and G20 level.

However, Schauble said Germany would not wait for a broader European regulations before enforcing its own levy.

The plan "aims to draw lessons from the financial crisis and put precautions in place so that such a crisis does not occur again or does not reach the same level," he added.

The German government's proposal faced opposition from savings and cooperative banks, who insisted that their loans to the real economy should be excluded from the balance sheets when determining its contribution.

Schauble will attend a French cabinet meeting in Paris next week, following the initiative that the two countries' ministers attend some cabinet meetings of each other in order to enhance the neighbor nations' relation.

Source: Xinhua


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