Against the protests of the banking industry, the bundestag passed a package of laws under which larger institutions in particular will have to separate risky trading operations from the traditional banking business in order to protect customer deposits.
In addition to this so-called separation banking system, liability penalties are envisaged for the management boards of banks and insurance companies in the event of breaches of duty in risk management. In addition, geldhauser must draw up its own recovery and resolution plans – known as "bank wills" – in order to react quickly in crises.
The previous day, the bundestag passed stricter capital and bonus rules. The main aim of all the measures is to ensure that taxpayers no longer have to foot the bill for bailing out ailing banks. The opposition criticized the black-yellow legislative plans as inadequate and unanimously rejected the package. Harmful "gambler" businesses remained part of an umbrella company of the bank concerned. In the election campaign, the union and the FDP only wanted to score points quickly after they had previously pulled out, criticized the SPD, the greens and the left.
The plans did not go as far as the proposal of an expert commission around the finnish central bank head erkki liikanen for separation banks.
Under coalition law, large banks must outsource trading for their own account and business relationships with hedge funds to legally and economically independent trading companies. Customer deposits can no longer be used to finance the bank’s own risky transactions. This applies if the risky transactions exceed 100 billion euros or 20 percent of the balance sheet total. Banks have until mid-2015 to identify such transactions – one year more than initially planned. According to earlier ministry statements, a few german institutes could currently be affected by the separation, with deutsche bank seen as the main candidate.
Banks can continue to operate the transactions in question on behalf of customers. This applies, for example, to transactions where industrial companies want to hedge against exchange rate or price fluctuations. The exceptions also include market making – the constant setting of buying and selling prices by which banks ensure the trading of securities and thus the liquidity of the market. However, the financial supervisory authority bafin is also to be able to demand the separation of these activities in individual cases.
Under the planned legislation, board members could face up to five years’ imprisonment if they violate material risk management duties and the institution is in distress. This is punishable if the perpetrator has acted against an order of the bafin and thereby endangered the existence of the company.