Berlin eyes jail time for reckless bankers - source

BERLIN Mon Feb 4, 2013 6:21am EST

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BERLIN Feb 4 (Reuters) - The German government will discuss a new law to imprison bank executives for up to five years if they are found guilty of reckless behaviour that put a bank at risk.

"We've found a regulatory gap here that we want to close," a senior government official in Berlin said on Monday.

According to the draft regulation to amend Germany's banking law, which the cabinet will discuss on Monday, a manager may face a jail sentence if he deliberately ignored risk rules and thereby risked the collapse of a financial institution.

The cabinet is also due to take up Finance Minister Wolfgang Schaeuble's plans to force big banks to separate their riskier trading activities from their deposit-taking business.

"We want to send a signal to Europe with this," the government source said, adding that EU moves in this direction "have not been fast enough".

Berlin has been seeking a common position with the French government over how to apply new European Union bank safety rules. By aligning the German proposal to a proposed French model, large European banks will be spared some of the tougher ring-fencing moves outlined by the EU's Liikanen group.

The government source said any change in German rules would apply to more than three lenders, more than expected. So far, banking observers had seen any change being limited to Deutsche Bank, Commerzbank and the country's biggest landesbank lender, LBBW. (Reporting By Gernot Heller; Writing by Edward Taylor and Jonathan Gould; Editing by Christian Kraemer and Maria Sheahan)

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