Follow Us

Follow us on Twitter  Follow us on LinkedIn

12 September 2013

BFM: Q&A with the German Parliamentary State Secretary Hartmut Koschyk on financial regulation

Koschyk explained why we are in a better position to handle a bank failure today, and outlined the new regulatory framework for financial markets.

Mr Koschyk, we are five years on from the Lehman Brothers collapse – could the failure of an individual bank still trigger another financial crisis today?

Even today, the disorderly failure of a large, globally interconnected and complex bank would still pose risks to the stability of the financial system. That is why we have taken the appropriate measures at the national, European and G20 level to prevent precisely that. We have substantially increased the capital requirements for all banks, especially the large and systemically important ones, in order to prevent banks from getting into distress in the first place as far as we possibly can. Through our law to separate banking activities, we will oblige banks to divide off particularly risky capital market business. In the event that this does not suffice, we are also creating transparent and efficient rules to wind up a bank without involving the taxpayer.

What are the specific components of the new regulatory framework that is designed to protect the financial system against crises?

Experience from the crisis has clearly shown that financial markets cannot be left to their own devices. The state needs to set and enforce the rules here as well. Through the new regulatory framework for financial markets, the German government is implementing the lessons learned from the crisis. In the process, the government has been guided by clear objectives:

  • We are restoring the principle of liability: this entails the strengthening of banks' capital adequacy as well as stricter limits on bonuses.
  • We are improving the financial system's resilience to crises: this involves the abovementioned provisions on the orderly restructuring of banks in particular, as well as tighter regulation of high-frequency trading and the ban on detrimental short selling.
  • We are sharing the costs of the crisis with those responsible: to this end, we in Germany introduced a restructuring fund at the start of 2011; and we are working at European level to introduce a financial transaction tax.
  • We are increasing market and product transparency

Are there any other measures to regulate the financial markets that still need to be taken?

We have substantially improved the regulation and supervision of financial markets. In addition to the on-going discussions about a European bank resolution regime, another example that comes to mind is the work under way on the shadow banking system. Some of the regulatory recommendations called for by the G20 are still outstanding in this regard – and measures that have already been adopted must be implemented consistently.

Full interview

© Bundesfinanzministerium

< Next Previous >
 Hover over the blue highlighted text to view the acronym meaning
Hover over these icons for more information

Add new comment