September 26, 2012 / 8:30 AM / 5 years ago

Germany's opposition SPD get tough on banks

BERLIN, Sept 26 (Reuters) - Germany’s opposition Social Democrats (SPD) would oblige banks to create their own rescue fund and split their investment and retail units if they unseat Chancellor Angela Merkel in a federal election next year.

Under proposals to be unveiled on Wednesday by former Finance Minister Peer Steinbrueck, a contender to lead his party’s challenge to Merkel, the rescue fund would have a target volume of 200 billion euros and it, rather than the state, would provide capital for stricken financial institutions.

The SPD’s plan is set to become a major campaign weapon for the party, which stands at around 26 percent in the opinion polls compared to 38 percent for Merkel’s conservatives. It is designed to tap into widespread public anger at banks’ perceived recklessness and culpability for the financial crisis.

“Banks are service providers and not betting shops,” the policy document states, adding financial markets have lost “measure and moderation”.

With Merkel’s current coalition partners the Free Democrats (FDP) languishing at just 4 percent, the chancellor could be forced to form a government with the SPD next year, in a repeat of the coalition she had during her first term from 2005 to 2009.

The size of banks’ contributions to a fund would be based on the advantageous interest rates they enjoy when tapping financing, because markets assume they are “too big to fail” and hence that an “implicit state guarantee” is in place.

Deutsche Bank alone enjoys a discount in interest rates worth around 2 billion euros, the document states, citing financial experts.

Salaries in the sector would be limited, and the rescue fund could issue bonds. Speculation with commodities such as grain would be banned.

“This is not about dealing with excesses on financial markets, this is about the fact that many people think politicians have lost their ability to control things, and that we can be pushed around, be blackmailed,” Steinbrueck told German television.

In a reference to Steinbrueck’s plans, Handelsblatt’s Tuesday edition ran the headline “Der Bankenschreck” (the banking terror) on its front cover. (Reporting by Holger Hansen and Matthias Sobolewski; writing by Alexandra Hudson; editing by Noah Barkin)

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