Chancellor Angela Merkel’s Cabinet extended by two years a facility for troubled German banks to seek government aid as efforts to form a pan-European bank- rescue fund drag on.
Banks will be allowed to seek assistance from Germany’s Soffin fund until the end of 2014, ministers meeting in Berlin today decided. Under current legislation, the fund would have stopped taking applications at the end of this year.
“Given the ongoing sovereign debt crisis in the euro area, there continue to be potential hazards for financial stability,” the Finance Ministry said in a document prepared for ruling coalition lawmakers. European resolution rules for banks won’t be in place before “the beginning of 2015.”
Germany reopened Soffin in February to counter the threat of financial-institution failures during the debt crisis, after allaying lenders’ concerns that they would bear the brunt of the cost. The new rules, which require parliamentary approval, will only give access to those banks that pay a fee to replenish the fund, according to the document. Banks may be required to fill any financing gaps when Soffin expires, the paper shows.
“The law will improve the supervision of financial stability in Germany,” Klaus-Peter Flosbach and Ralph Brinkhaus, lawmakers from Merkel’s Christian Union bloc, said in an e-mailed statement. “Germany is making a contribution toward more stable financial markets at European and international level as well.”
Wolfgang Schaeuble, the German finance minister, recommitted to common rules for Europe’s banks to help them survive future market turmoil two days ago as he sought to reassure investors that the banking union will come into force.
His comments, in a speech to the second Bank of Thailand Policy Forum in Bangkok, marked a shift in tone after Schaeuble led criticism last month of the euro area’s rush toward a single bank supervisor. Setting up European Union-wide banking supervision is on the agenda at this week’s EU summit.
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