Germany plans to revive the country’s bank-rescue fund Soffin to provide capital to lenders that can’t raise money from owners or investors, Deputy Finance Minister Joerg Asmussen said today.
“The need for capital is to be first and foremost covered by shareholders and the market, and where that doesn’t occur there will be coordinated aid from states,” Asmussen said at a conference in Frankfurt today. “In Germany, we will reactivate the old financial market stabilization law.”
The European Banking Authority in October said the region’s lenders need to boost capital by 106 billion euros ($144 billion), including 5.2 billion euros for German lenders, to boost their resilience against sovereign debt losses. Soffin, which was created in 2008 amid the credit crunch to provide capital and debt guarantees to lenders, stopped providing new financial support at the end of 2011.
The fund was superseded by a new German law overseen by the Federal Agency for Financial Market Stabilization, which helps to restructure and wind down lenders whose potential collapse would risk damaging the industry and wider economy.
German Finance Ministry spokesman Johannes Blankenheim, at a regular government press conference today, said it remains to be seen whether banks will need government aid to boost their capital.
Commerzbank AG said in October that the EBA deemed it needs to raise 2.94 billion euros, while Norddeutsche Landesbank Girozentrale said it will raise 660 million euros. Landesbank Baden-Wuerttemberg said the regulator identified a 364 million-euro shortfall in its balance sheet.
Deutsche Bank AG and Commerzbank, Germany’s two biggest lenders, have said they don’t plan to seek government aid and will raise capital levels through measures such as reducing risk-weighted assets.