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Germany drafts new banking rules

The government of Germany has proposed a new set of stringent banking rules to thwart reoccurrence of the 2008 financial crises in future and make banks more accountable for their actions.

The draft law, which has been approved by Finance Minister Wolfgang Schäuble and Chancellor Angela Merkel, is likely to come into force from June this year, pending Parliament approval.

Finance Minister Wolfgang Schaeuble was quoted by The as saying, "We know that the exaggerated de-regulation (of the financial markets in the past) was a mistake."

As per the proposed banking guidelines, the big banks will have to part their various operations into separate units, in a move to save customers’ deposits from their riskier operations.

The financial institutions, whose high-frequency trading or hedge-fund financing will be either 20% of the balance sheet or exceeds €100bn ($135bn) in value, will have to implement the aforesaid rule.

Without naming any financial organization, the minister said that nearly 10-12 banks in the country will be affected.

Banks will have to prepare a contingency plans for restructuring or closing the operations, in case they face financial difficulty.

It also proposes that high-level managers and executives will be sentenced for five years, if they are found responsible for the crisis or shirking their risk management duties.

European countries such as France and the UK have either proposed or considering the same laws to regulate the banking industry.