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Deposit guarantee and compensation schemes

In early March 1998, the German federal government published a draft statute for the implementation of EC directives on deposit guarantee schemes (94/19/EC) and investor compensation schemes (97/9/EC). The statue will create a whole new system of compensation schemes. The existing (private and voluntary) deposit protection scheme of the association of private banks in Germany (Einlagensicherungsfonds), offering an exceptionally high degree of protection (ie each deposit is insured up to an amount equivalent to 30% of the bank's liable capital) will remain in place with the new compensation schemes.

The planned statutory provisions on deposit guarantee and investor compensation will only meet the minimum requirements of the EC directives. Under section 4, paragraph 2 of the draft, a compensation claim will be limited to Ecu20,000 and only 90% of the losses will be covered. The new compensation schemes will consist of various funds to be established with Kreditanstalt für Wiederaufbau, a bank organized under public law. According to section 7 of the draft, the Ministry of Finance can also grant a licence for the establishment of a compensation fund to a private entity. The funds must be financed by fees from all banking and financial services institutions, whose membership of one of these compensation funds is compulsory.

In addition, the new law will also amend existing statutes, including the Banking Act, the Securities Trading Act and the Investment Companies Act, as well as some tax law provisions. It is hoped to come into force on August 1 1998.

Draft on index-linked price clauses

Contractual clauses providing for prices linked to an index will continue to be subject to legal restrictions. Under section 3 of the Currency Act (Währungsgesetz), many index-linked price clauses need the prior consent of the Landeszentralbank (regional branch of Deutsche Bundesbank) to be valid. On January 1 1999, the establishment of the Emu will lead to the abolishment of section 3 of the Currency Act. However, after public debate, the federal parliament's legal committee accepted a draft statute amending an already existing piece of legislation to become the Price Indication and Price Clause Act (Preisangabe- und Preisklauselgesetz). Under section 2 of this draft, restrictions on index-linked price clauses must be re-established. Nevertheless, the new provision will have a narrower scope than section 3 of the Currency Act, because the entire money and capital movements area has been excluded. Under the new provisions, the German Federal Ministry of Industry will be in charge of granting approvals, where necessary, instead of the Bundesbank organization.

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