Regulatory Acts in the Law of Germany and France Essay

Germany

The German Stabilization Act

This act was really helpful while the crisis as its main idea was the creation of the Stabilization Fund. This Stabilization Fund was aimed at overcoming liquidity shortfalls and strengthening capital resources for the German Financial Sector. The functioning of the Act had to be provided through granting financial guarantees, “refinancing such entities, particularly through the acquisition of equity stakes in such entities against capital contributions”¹ and “acquiring risky financial instruments and other assets, particularly receivables, securities, derivatives, and rights and commitments from stand-by credit facilities”.²

The German Act for the Strengthening of the Financial Markets and Insurance Supervision

One of the main ideas of this act is to regulate the market by means of strengthening the powers of the German Federal Financial Supervisory Authority. The most important aspects of this Act which encouraged the German government to accept is are as follows, prohibition on the distribution of profits and payments to affiliated companies. Moreover, the new reporting requirements help consider the risks and the stricter requirements for members of supervisory boards help avoid those risks and stabilize the market.³

The FDICIA Act of 1991

This Act allowed the country to borrow from the central act. This is one of the most important opportunities while the crisis as the government can get money to cope with the inside problems. The Act was directed at supporting the country’s banks and making those effective leaders for others while complicated circumstances.⁴

The Financial market Stabilization Act

This Act was used for combating the crisis by means of a public Financial Market Stabilization Fund which is going to support those who really require assistance. Financial institutions are promised to receive the Fund credit guarantees of up to €400 with the purpose to improve the access of liquidity and strengthen the confidence of the bans in Germany. Finally, the Act serves for aggregating of up to €80 for capitalizing the financial institutions and for acquiring risky assets from the financial institutions to help those relieve their capital base.⁵

France

Article 6 of the Finance Law

The Rescue of Dexia

The bank was affected by the second wave of the crises and France, Belgium and Luxembourg agreed to save the bank by means of putting it at risky positions and then turning to safe bank. To protect Dexia, the bank borrows money from financial markets. The deposits are not used as they remain too risky during the crisis. Belgium pays €4 billion for acquiring Dexia Banque Belgique. To make sure that bank is protected the country pays €54 billion as a guarantee. Dexia’s French public finance unit as well as the company’s Luxembourg operations are going to be sold.⁶

Bibliography

“Dexia Rescue: Belgium Nationalizes Troubled Bank.” Spiegel Online 2011. Web.

“Germany’s Response to the Current Global Financial Crisis.”. 2008. Web.

Pak, Susi and Sandra Pfister. “German Act relating to the Strengthening of the Financial Markets and Insurance Supervision.” Practical Law Company. 2009. Web.

“The German Financial Market Stabilization Program.” Cleary Gottlieb. 2008. Web.

Todd, Walker F. “FDICIA’s Emergency Liquidity Provisions.” Economic Review Q.III (1993): 16-23. Print.

Footnotes

1. “Germany’s Response to the Current Global Financial Crisis.”. 2008. Web.
2. ibid.
3. Pak, Susi and Sandra Pfister. “German Act relating to the Strengthening of the Financial Markets and Insurance Supervision.” Practical Law Company. 2009. Web.
4. Todd, Walker F. “FDICIA’s Emergency Liquidity Provisions.” Economic Review Q.III (1993): 16-23. Print, p. 16.
5. “The German Financial Market Stabilization Program.” Cleary Gottlieb. 2008. Web.
6. “Dexia Rescue: Belgium Nationalizes Troubled Bank.” Spiegel Online 2011. Web.