Several government rescue packages later, the troubled German banking sector is still showing no sign of recovering from the financial crisis.
The discussion over what to do with the hundreds of billions of euros worth of toxic securities the banks still have on their balance sheets has received fresh impetus in Germany after it became clear that the Special Fund for Financial Market Stabilization — known as Soffin after its German acronym — is not succeeding in its intended aim of helping out troubled banks and jump-starting financial markets. Günther Merl, the head of the agency that manages Soffin, announced Wednesday that he was resigning — the second person to quit the agency’s steering committee within the last three months. Insiders say that Merl was frustrated at having his authority usurped by government and Finance Ministry officials.
Now the talk is of setting up a so-called “bad bank” to take over banks’ toxic securities — an approach backed by a number of leading German bankers. Sweden was able to successfully use this model in the early 1990s to combat its own credit crunch. The state even made money when distressed assets were later sold.
Read it all.
Der Spiegel: 'German Banks Are on the Edge of the Abyss'
Several government rescue packages later, the troubled German banking sector is still showing no sign of recovering from the financial crisis.
The discussion over what to do with the hundreds of billions of euros worth of toxic securities the banks still have on their balance sheets has received fresh impetus in Germany after it became clear that the Special Fund for Financial Market Stabilization — known as Soffin after its German acronym — is not succeeding in its intended aim of helping out troubled banks and jump-starting financial markets. Günther Merl, the head of the agency that manages Soffin, announced Wednesday that he was resigning — the second person to quit the agency’s steering committee within the last three months. Insiders say that Merl was frustrated at having his authority usurped by government and Finance Ministry officials.
Now the talk is of setting up a so-called “bad bank” to take over banks’ toxic securities — an approach backed by a number of leading German bankers. Sweden was able to successfully use this model in the early 1990s to combat its own credit crunch. The state even made money when distressed assets were later sold.
Read it all.