Development of the legal framework of Germany's financial market stability mechanisms

Christian Alexander Mecklenburg-Guzmán, cmecklenburg@ mayerbrown.com, Mayer Brown LLP, Frankfurt, Germany.

Introduction

The German Parliament ratified the second Financial Markets Stabilisation Act (FMStG or the Act) whereby the Financial Markets Stabilisation Fund (SoFFin) is entitled to continue stabilisation measures benefiting an extended scope of distressed financial institutions as of 1 March 2012. Moreover, it entrusts supervisory agencies with additional powers. This is essential for an orderly resolution of the remaining risky positions in the aftermath of the financial crisis in Germany; furthermore, it demarcates the transition from financial institution debt crisis to a sovereign crisis. It establishes a preventive safety net for contingencies arising for institutions in Germany arising from the latter. The measures are of temporary nature and expected to expire on 31 December 2012.