Bloomberg News

German Regulator Outlines Plan to Avoid Bank Bailouts

November 02, 2012

Germany’s banking regulator, seeking to avoid tax-funded bailouts of the financial system, presented a road map for winding down failed institutions in the event of an emergency.

The country’s banks must put forward proposals on how they would cope with adverse scenarios defined by the regulator, Raimund Roeseler, the head of banking supervision at BaFin, told reporters at a news conference in Bonn today. BaFin would then develop plans for possible asset disposals, he said.

Global regulators are calling on banks to hold more capital and prepare for their potential failure to avoid a repeat of the taxpayer-funded rescues that followed the 2008 collapse of Lehman Brothers Holdings Inc. The German regulator oversees 1,879 banks, more than peers in Spain, Italy, Greece and Ireland combined, according to European Central Bank data.

Banks of global, systemic importance such as Deutsche Bank AG (DBK) have until the end of the year to present their plans. Lenders relevant on a national scale must submit theirs by the end of next year, Roeseler said.

U.S. regulators submitted detailed proposals in July on how they would dismantle banks should they fail.

“The issue of too big to fail isn’t solved,” Roeseler said. BaFin wants to “shape the European debate” and is acting more quickly than regulators elsewhere on the continent, he said.

While 15 banks in Germany would be systemically relevant on a national scale when markets are functioning normally, that figure is higher as “the current situation isn’t easy,” Roeseler said.

To contact the reporters on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net; Annette Weisbach in Frankfurt at aweisbach1@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net


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