Germany to punish bankers for missteps, separate retail from proprietary trading

Germany wants to punish bankers who take excessive risks and require some banks to separate retail activity from riskier proprietary trading, officials said Wednesday.

Finance Minister Wolfgang Schaeuble said the proposed measures were part of an effort to draw lessons from the 2008 financial crisis, when governments around the world had to bail out ailing banks to avoid a collapse of the international financial system.

"Whoever has a chance to profit also has to bear the risk," Schaeuble told reporters in Berlin.

The new German banking rules were drawn up in coordination with France. The two countries have been at the forefront of tighter regulation in Europe, pressing ahead with national legislation in the hope that these can eventually be extended to the entire European Union.

The bill, which will be put before Parliament this year, would punish bankers and insurance executives who are found culpable for a financial institution's collapse, or who failed to take measures to prevent it, with up to five years in prison.

It also would require banks whose risky trading activity exceeds €100 billion a year or 20 percent of its balance sheet to separate those businesses from the retail banking activity. The measure is designed to prevent ordinary customers from losing their deposits if a bank's proprietary trading goes awry.

Schaeuble said up to a dozen banks could be affected by the new rules. He didn't name them, but experts say these would include Deutsche Bank and Commerzbank.

Germany's banking industry said the bill would weaken the country's financial sector and accused the government of trying to win voters' favor ahead of a general election in September.

But Schaeuble said the bill was a sensible reaction to the excessive deregulation that led to the 2008 financial crisis.

"No financial market, no actor and no product should be left unsupervised," he said. "We can't put these measures off forever."