By Sarah Sloat
FRANKFURT–The German government plans to require large banks to prepare so-called living wills outlining what should happen if the bank runs into deep financial trouble, a spokesman for the Finance Ministry said Saturday, confirming a report in daily Sueddeutsche Zeitung.
The goal is to have a roadmap determining whether banks threatened with collapse should be shut down or restructured, in either case with an eye to limiting the burden on taxpayers. Around 10 German banks would be affected by the plan being drawn up in the Finance Ministry.
Earlier this month, German financial regulator BaFin said it had already asked major banks to compose living wills laying out recovery and resolution plans which–in case of severe financial distress–would allow them to be wound down in an orderly fashion. BaFin said the plans should be submitted by the end of next year, though Germany’s two biggest banks, Deutsche Bank AG (>> Deutsche Bank AG) and Commerzbank AG(>> Commerzbank AG), would be expected to turn their plans in earlier.
Deutsche Bank is considered a systematically relevant bank globally, and due to U.S. regulations submitted a living will to U.S. financial authorities earlier this year.
The Finance Ministry’s plan foresees banks submitting their living wills for approval to BaFin, which could ask for changes, the spokesman confirmed.
