Statutory basis

The German Financial Market Stabilisation Fund Act (FMStFG) and the German Act to Accelerate Financial Market Stabilisation (FMStBG) represented key steps toward stabilising the financial markets during the current crisis.

The legislation set out measures to quickly eliminate undesirable risk exposures and non-strategic businesses/assets that were ripe for liquidation from the accounts of financial institutions and other financial sector enterprises. In particular, the German Act to Continue Financial Market Stabilisation (FStFEntwG), which amended the German Financial Market Stabilisation Fund Act, allows financial sector enterprises to transfer risk exposures and non-strategic businesses/assets to a structurally and financially independent winding-up agency established for the respective enterprise.

The principle of owner responsibility applies to the apportionment of liabilities: winding up the transferred risk exposures and non-strategic businesses/assets is the responsibility of the respective winding-up agency and the direct and indirect owners of the financial institution or other transferring entities, who in turn are stakeholders in the winding-up agency and have a duty to offset losses.

Source: Source: German Financial Market Stabilisation Fund Act of 17 October 2008 (Federal Law Gazette I p. 1982), most recently amended by Article 24 (24) of the Act of 23 June 2017 (Federal Law Gazette I p. 1693); German Act to Accelerate Financial Market Stabilisation of 17 October 2008 (Federal Law Gazette I p. 1982, 1986), most recently amended by Article 24 (25) of the Act of 23 June 2017 (Federal Law Gazette I p. 1693); Explanatory Statement on the draft bill of the FMStFG..