Suddenly 2.3 billion euros left - dispute over the remaining funds from the bank rescue

A political dispute is brewing, which is to Gerhard Schick's taste. It's about banks and about 2.3 billion euros that they paid into a national rescue fund ten years ago in the wake of the financial crisis and now want to get back.

Schick, a former Greens member of the Bundestag and today's pioneer of the non-governmental organization Finanzwende, thinks this is the wrong way to go. Financial institutions would have done a huge amount of damage with the financial crisis.

"Demanding money from the federal government, even though debts from the bank bailouts are still open, is just outrageous," said Schick. Federal Finance Minister Christian Lindner (FDP) must show that he has the interests of taxpayers in mind and is not only making politics for the banks.

For Schick it is a question of justice if the 2.3 billion euros do not flow back directly to the banks, but are used to repay at least a small part of the debt that the state once used to rescue Commerzbank and wind up Hypo -Real Estate included.

The minus that was caused by the former aid measures is currently 23 billion euros. The loss from the bank bailout could therefore be reduced by ten percent.

The 2.3 billion euros are still in the national restructuring fund RSF, where they were paid in between 2011 and 2014. But the money is no longer needed there, as the RSF has since been replaced by a European rescue vehicle with the abbreviation SRF, the Single Resolution Fund.

For the contribution year 2022 alone, domestic credit institutions will pay in 3.38 billion euros there. The total volume of the fund is currently 66 billion. It should be completely filled by the end of 2023.

The funds in the European fund have the same purpose as those in the national fund: to wind down banks in an orderly manner in the event of a crisis and to prevent financial stability from being shaken, as was the case after the US investment bank Lehman Brothers went bankrupt.

Lindner's Federal Ministry of Finance has not yet decided what to do with the 2.3 billion euros. "There is currently no decision on this," the ministry said. The federal government will make a proposal for the future use of the old funds in due course.

A report commissioned by the ministry itself sets strict limits on finance minister Lindner. The credit institutions would not be entitled to recover the contributions once paid into the national RSF.

"The legislature cannot voluntarily pay out these remaining funds to the credit institutions, at least not in full," write Ekkehart Reimer, Professor of Finance and Tax Law at the University of Heidelberg, and his academic assistant Andela Milutinovic.

They also believe that a second option cannot be implemented: According to the report, the 2.3 billion cannot simply be transferred to the state budget. After all, the money that once filled the national bailout fund came from the banks and not from the general taxpayer community. In this context, the formulation of a “principle of use for the benefit of the group” is crucial.

Since the further use of the funds must be related to the credit industry, the experts believe that there are only a few options. "As such, the repayment of part of the old debts of the Financial Market Stabilization Fund (FMS, "Soffin") comes into consideration," write Reimer and Milutinovic. The FMS contains the debts that were incurred as a result of the rescue of Commerzbank

The banks consider these legal reservations to be unfounded. "The remaining funds from the national special levy should be refunded to the contributors or offset against the European levy," said the Central Association of the German Banking Industry.

The European legislature has expressly granted this possibility to the Member States. The 2.3 billion euros could be used to expand the banks' scope for lending.

However, the interest group of the banks also said that it was not possible to repurpose the old funds to cover the loss from the FMS for funds that had already been received.

A decision must be made on the further use of the old debts in the coming months. In the parliamentary group of the Greens, there are clear expectations of the FDP finance minister as to what the decision should be.

“Taxpayers saved the banks billions during the financial crisis. Against this background, I think it is logical and correct to use the old funds from the restructuring fund to cover at least a small part of the costs," said Green finance politician Sascha Müller. From his point of view, paying out the old funds to the banks would be neither legally correct nor justifiable to the taxpayer.

A bank-friendly approach is represented in the ranks of the CDU/CSU parliamentary group. "We propose to transfer these funds to the single EU resolution fund SRF for the same purpose," said Antje Tillmann, the Union's financial policy spokeswoman.

Her party colleague Michael Meister added that in return the transfer to the SRF “should be offset against the outstanding contributions from the German institutes to the SRF”. This comes at least close to a return of the funds: In 2023, the institutions would have to pay a smaller contribution to the European resolution fund than this year.

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