While we dither about bank reregulation, the Germans have got on with their business. Today they announced significant new regulation for the banking sector.
These are some of the new rules:
- Stress tests have to be performed for all identifiable risk sources including liquidity shortages.
- In their risk management, the banks will be required to include all of their identifiable risks, including risks in unconsolidated companies. Translation, you can’t hide risk in off balance sheet subsidiaries any more.
- Short-term profitability cannot play a role in compensation schemes.
- Compensation may be clawed back if future results are negative.
This is all that I’ve seen reported so far. The details will be all important but it appears as if the German regulators are taking a hard line. According to the article in the Journal, the clawback provisions were sternly resisted by the banking community to no avail.
Imagine that, some governments can stick up to their bankers.
more: here
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