The reforms in the banking and financial sector after the Lehman crash in autumn 2008 do not go far enough for the “Citizens’ Financial Transition Movement”. “In order to prevent a new major crisis and end the many small crises, Finanzwende is calling for fundamental reforms in the financial sector 15 years after the global financial crisis,” says a paper from the initiative, which was co-founded in September 2018 by long-time Green Party member of the Bundestag Gerhard Schick had been.
“We need banking regulation that is worthy of the name. Despite numerous promises from several finance ministers, the financial lobby has managed since 2008 to either water down or completely prevent many stricter rules. There can therefore be no talk of stability or crisis resistance today,” criticized Chic.
Demands of the initiative
Specifically, in the eleven-page paper, the “Citizens’ Movement for Financial Transition” calls, among other things, for the distribution of bonuses at banks to be linked to the achievement of an equity ratio of at least ten percent. Equity is a buffer for times of crisis. In addition, according to “Finanzwende”, a separation banking law should ensure that “the risky investment business is effectively separated from the deposit business”.
According to “Finanzwende”, “sufficiently high equity and liquidity standards” should be introduced for hedge funds so that these funds “do not endanger overall financial market stability through their speculative transactions”. In the case of private equity firms, the citizens’ movement is calling, among other things, for “liability” so that these investors are “liable for the debts they impose on acquired companies.”
With the bankruptcy of the US investment bank Lehman Brothers on September 15, 2008, the global financial and economic crisis at the time became extremely serious. As a result, stricter rules were introduced for banks. Financial institutions, for example, are now obliged to hedge risks with more of their own capital. The institutions in both the USA and Europe also regularly have to prove in stress tests that the buffers would be sufficient even in the event of extreme crises so that the state does not have to bail out banks with billions in taxes again.
