Financial strength of the new-bank restructuring fund
Ensure the financial strength of the new
bank restructuring fund, and clarify the
interaction between the restructuring
fund and the various deposit guarantee
schemes (DGS) and mutual protection
– The German Bank Restructuring Fund rests on three
strong pillars. From 2011 to 2013, approximately EUR
1.8bn were collected from the banks via an annual levy.
This primary pillar will increase in volume over time.
Should the banks achieve a higher profitability in the
future, the annual bank levy will increase, as the caps
would no longer constrain the levy.
As a second (temporary) pillar, up to EUR 20bn are
available to the Fund immediately as a federal loan in
cases where the sum of the collected fees is insufficient
at the time of utilisation of the Fund. This pillar also
consists of liquidity guarantees of up to EUR 100bn.
These measures have been available from day one of the
setting up of the Fund in order to guarantee its
credibility and authority. The federal loan is only meant
as a backstop to ensure the Funds functioning until such
a loan would be repaid by the banks, if necessary
through special levy (third pillar), which may increase
the annual levy in any particular year by up to 300%.
The system of levies ensures that even if the state had to
step in, the ultimate bill would be presented to and
borne by the banks. In fact the purpose of the law, to
place the burden firmly with the industry is arguably
already achieved at the present stage.
There is no formal interaction between the Fund and the
DGS/mutual protection schemes. Whereas the Fund
provides own capital and guarantees to ensure
restructuring of assets and liabilities relevant for the
stability of financial system the DGS/mutual protection
schemes act as safeguard for protected deposits within
the respective framework, i.e. At least EUR 100.000 per
eligible customer per bank. As in the past, individual
DGS schemes will be asked to contribute to costs of
future rescue measures in proportion to the savings they
achieve by avoiding the failure of a bank.
This will continue to be a matter of bargaining until the EU Bank
Recovery and Resolution Directive is implemented.