* Finance ministry says could reactivate SoFFin
* Banks say rescue fund not needed yet, restructuring law
* Experts see Berlin preparing banks for Greek writedown
(Adds joint banking associations comment)
By Sarah Marsh and Philipp Halstrick
BERLIN/FRANKFURT, Oct 5 German banks said on
Wednesday there was no need yet to reactivate the bank rescue
fund SoFFin, a move floated by the government amid growing
expectations the financial sector may have to bear a
larger-than-expected writedown on Greek debt.
German Finance Minister Wolfgang Schaeuble surprised the
sector on Tuesday evening by saying Berlin could reactivate
measures used at the height of the banking crisis in 2008, such
as SoFFin, to prevent another crisis [ID:nB4E7KG026].
Berlin had previously said it would never again let
taxpayers bear the burden of banks' mistakes and passed a bank
restructuring law to replace SoFFin, which expired in January.
German public and private banks said in a joint statement
the financial sector was much better placed now to face future
challenges thanks to the new law, but did not rule out a future
need for SoFFin to be reactivated.
"The government has clearly said it could reactivate the
laws of 2008 if necessary," they said. "This is not the current
A spokesman for Germany's VOEB public-sector banking
association said separately it did not see any potential
restructuring case in Germany: "There’s no need for activism."
During the crisis, Landesbanken such as BayernLB [BAYLB.UL]
and WestLB [WDLG.UL] received billions of euros of guarantees
from the 480 billion euro SoFFin rescue fund. [ID:nLDE68F1CM]
A finance ministry spokesman said all German banks were
well-equipped right now, but the government stood ready to
capitalise banks if necessary - a sentiment echoed by Chancellor
Angela Merkel later on Wednesday, highlighting rising fears of a
new liquidity crunch. [ID:nB4E7KG022]
"The German government stands ready to implement such a
capitalisation of the banks if it is needed," Merkel told a news
conference in Brussels. [ID:nB4E7KT004]
European finance ministers agreed on Tuesday to safeguard
their banks as doubts grew about whether a planned second
bailout package for debt-laden Greece would go ahead.
Hours earlier French-Belgian municipal lender Dexia SA
(DEXI.BR) had become the first European bank to have to be
bailed out due to the euro zone's sovereign debt crisis.
"Everyone said the big concern is that worrying developments
on the financial markets will escalate into a banking crisis,"
Schaeuble told a news conference after the meeting of European
finance ministers in Luxembourg.
Hans-Peter Burghof, banking expert at University of
Hohenheim, said Schaeuble should not highlight German banks as
"the problems do not lie with German banks, but rather with the
French or Belgian ones."
Germany introduced a restructuring law this year providing
for the orderly winding down of banks that run into trouble,
including a levy enabling banks to insure themselves against
SoFFin now only guarantees existing support measures for
banks such as Germany's second-biggest lender Commerzbank
(CBKG.DE) which resorted to state bailouts during the financial
A reactivation of SoFFin could be interpreted as an
admission that Chancellor Angela Merkel's coalition does not
trust its new law as sufficient.
"The government promised the restructuring law would be
enough, and it's sad when so quickly thereafter it already
questions its efficiency," said Wolfgang Gerke, president of the
Bavarian Financial Centre.
"This must not lead to huge pots of money being made
Opposition lawmakers, called this week for a speedy
reactivation of SoFFin to prevent another financial meltdown.
Such a move would have to be ratified by parliament.
Social Democrat budget expert Carsten Schneider said it was
terrifying the government was not prepared for serious liquidity
problems at banks, unlike in other countries, and did not appear
to have a plan B.
However, financial experts said it was positive that
politicians were making the European banking system the focus of
their efforts to resolve the debt crisis, rather than the
debt-laden economies themselves.
"Thus we (Germany) are bracing for a truly considerable debt
haircut," said Burghof.
The growing prospect of a debt default by Greece in the
coming months has stoked fears of a major banking crisis in
Europe that would aggravate the global economic slowdown.
The BdB banking association warned last week against
re-negotiating a 21 percent haircut on Greek sovereign debt
agreed by lenders. [ID:nL3E7KT2DG]
(Additional Reporting by Gernot Heller, Matthias Sobolewski,
Erik Kirschbaum and Stephen Brown. Editing by Jane Merriman)
((firstname.lastname@example.org)(+ 49 30 2888 5226))
Keywords: GERMANY BANKS/SOFFIN
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