September 18, 2014 / 6:12 PM / 3 years ago

Germany plans to ease bank ring-fencing law - paper

BERLIN, Sept 18 (Reuters) - Germany’s Finance Ministry intends to ease a law introduced at the start of 2014 obliging banks to ring-fence speculative activities from other business lines, the Frankfurter Allgemeine Zeitung (FAZ) reported, citing an internal ministry memo.

The memo suggested that German banks would no longer have to ring-fence their credit businesses from riskier hedge fund operations, the paper said, in an advance copy of an article due to appear on Friday.

The Finance Ministry was not immediately available for comment.

The memo argued that ring-fencing speculative activities was no longer necessary as other countries, in particular France, were opposed to such legislation, and future European rules to reduce trading risks at banks would also likely be less stringent then originally expected.

“This could lead to problems because German banks would have to start restructuring now, in order to meet the German law,” the memo said.

Earlier this year Germany and France sought to shield their flagship lenders from any large shake-up by Brussels, echoing the views of the banking industry, that excessive regulatory interference could damage their ability to lend to the economy.

FAZ said the memo showed Finance Minister Wolfgang Schaeuble moving towards Deutsche Bank’s position.

Deutsche Bank, one of Europe’s largest banks, has total assets of more than 1.6 trillion euros - two-thirds the size of Germany’s economy - and lends to the country’s top companies as well as having significant hedge fund operations. (Reporting by Alexandra Hudson; Editing by Hugh Lawson)

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