Bad banks
July 10, 2009
A plan to allow banks rid themselves of toxic assets, passed by the lower house of parliament last week, was approved by Germany's upper house on Friday.
In the Bundesrat's last session before adjourning for the summer (and the last before parliamentary elections in September), lawmakers passed a plan to allow banks to trade bad assets for guaranteed bonds worth 90 percent of their value.
Up to 230 billion euros of bad assets could be offloaded into separate entities, allowing the banks to clear their balance sheets and shift available funds from reserves used to cover the bad assets toward lending.
Additionally, the government bonds the banks receive in exchange would be worth more on the open market and could raise capital themselves.
Banks are to pay the costs of setting up the so-called "bad banks," as well as a fee for the guaranteed bonds.
The impetus for the measure is a perception that Germany risks a freeze in credit if banks' debt burdens are not eased. Finance Minister Peer Steinbrueck, in an interview with the Frankfurter Rundschau newspaper, said "we must take seriously, very seriously, the threat of a credit crunch in the second half of the year."
Much more in store
Meanwhile, German lawmakers also passed anti-tax evasion legislation that would let authorities demand more information from companies and individuals operating in countries that fall short of OECD standards on banking secrecy.
Other laws passed included one that reinforces banking clients' rights, another which would curb executive pay and call for fines for cases of egregious mismanagement, and a law meant to expand the power of financial regulators
The Bundesrat also formally adopted a finance law that would see the country's public deficit reach 49.1 billion euros in 2009, its highest in 23 years.
In matters of social policy, the Bundesrat gave its stamp of approval to two measures already passed by the Bundestag. The legal minimum age for the use of high-caliber firearms is to be raised from 14 to 18, and all guns must be registered in a new central database by 2012.
A controversial new law meant to fight the distribution of child pornography on the internet was also passed. It calls for Web sites suspected of trafficking in child porn to be made un-viewable in Germany, replaced by a screen displaying a STOP sign.
mrh/dpa/AFP
Editor: Chuck Penfold