Germany targets euro speculators
Published 03/06/2010 | 05:00
GERMAN Chancellor Angela Merkel's cabinet backed a ban on naked short-selling of credit-default swaps on euro-area government bonds and stocks of German companies, as the government moved to anchor steps to stop speculators in law.
The proposal, approved by ministers meeting in Berlin yesterday, also gives Germany's Finance Ministry and the BaFin regulator leeway to ban euro-related derivatives trade without seeking endorsement by lawmakers.
The bill, which may be passed by parliament in July, obliges investors to inform BaFin of naked short positions on shares in German companies.
"The financial crisis has shattered confidence in financial markets and has revealed the need for further substantial improvement of oversight rules," the bill says.
Mrs Merkel said the measures are needed to fight speculation and preserve the euro's stability during the biggest crisis ever faced by the shared currency.
She's urging the Group of 20 to tighten financial rules when leaders meet in Canada at the end of this month.
Finance minister Wolfgang Schaeuble said that he expects Germany's initiative to accelerate planned European restrictions on naked short-selling. Michel Barnier, the EU financial services commissioner, will present a proposal in October that may be similar to Germany's, Mr Schaeuble said.
The bill grants BaFin discretion to temporarily ban the trading of stock and euro-currency derivatives.
"It certainly makes sense to move the decision on these steps back into the hand of BaFin," said Okko Behrends, a capital markets lawyer at Allen & Overy in Frankfurt.
"That makes it more flexible than an outright legislative ban and moves the powers to those who have the technical expertise for it."
Mr Schaeuble also welcomed a French proposal to create European competitors to US-based credit rating companies, telling reporters in Berlin that their "oligopoly" in the market should be broken.
European Central Bank council member Christian Noyer said French credit insurers such as Euler-Hermes and Coface could become Europe's credit rating companies.