BERLIN (MNI) – France’s government on Wednesday welcomed the
decision by the German government to introduce banking dues for a
special emergency fund and to enlarge government authority in dealing
with troubled banks.

“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 government said in a joint statement.

French Finance Minister Christine Lagarde participated as a guest
in the German government cabinet meeting today.

In its financial market regulation draft adopted today, the German
government said it wants to assure that the credit industry is providing
itself the financial means to combat future crises and restructure
systemically important banks. A more detailed financial market
regulation bill is to be passed on to parliament by this summer.

In the rough draft adopted today, the German government stipulates
that the share of dues each bank would pay depends on its systemic risk,
the degree of integration in financial markets and possible other
indicators. All banks would be required to pay these dues.

German Finance Minister Wolfgang Schaeuble said in a press
conference after the cabinet decision that the bank dues would amount to
around E1 to E1.2 billion per year. The money is to flow into a special
fund which is to be administered by the government’s Financial Market
Stabilisation Agency (FMSA).

Schaeuble said the government is aiming to make those dues non-tax
deductible, but it is as yet unclear whether that would be in accordance
with the German constitution.

Lagarde, speaking at the same press conference, said the French
government was still in the process of assessing the possibility of
introducing a special tax for the financial sector.

The German draft also foresees giving the government authority to
consign the systemic parts of a troubled bank to a state-owned “bridge
bank.” This would allow the government to operate the systemic bank
parts and liquidate the non-systemic parts without causing turbulence in
financial markets.

In their joint statement, the German and French governments said
they were aiming for the introduction of bank resolution regimes in all
EU member states.

“Key objectives of this resolution regime should be to enable early
interventions as well as a managed resolution and wind-down of
systemically important banks, including cross-border ones,” they said.

Bank resolution regimes should enable the competent authorities to
resolve systemically important functions of a failing bank so that they
are unaffected by the bank’s insolvency and remain in operation, they
explained in their joint statement.

Resolution of viable units and systemically important functions can
be achieved by a sale to a private-sector entity or, if a private buyer
is not available, by provisional transfer to a state-owned bridge bank,
Germany and France proposed to their EU peers.

“In order to ensure that the financial sector will fairly bear the
cost of negative externalities it generates, in particular in crisis
times, we support the idea of introducing a levy differentiating for
systemic risks,” the statement read. The basis of the levy should be
risk-based and aim at an international level playing field, they said.

“France and Germany will actively support the implementation of
bank resolution mechanisms and systemic risk levies in the framework of
the Eurogroup, the Ecofin and the G20 in order to ensure a level playing
field,” they stressed.

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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