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The new German Ringfencing Act establishing criminal liability of banking and insurance executives for failures in risk management

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  • Richter, Thomas

Abstract

The German parliament recently approved a new law regarding individual criminal liability of banking and insurance executives, which will take effect as of January 2014. Under the new so-called Ringfencing Act (Trennbankengesetz), specific duties and responsibilities for risk management will be imposed on these executives. Failure to comply with these duties will be punishable by a maximum of five years’ imprisonment if it causes a threat to the viability as a going concern of a bank, or insolvency or over-indebtedness of an insurance company. This paper provides a description of the risk management duties and the corresponding criminal penalties. It also discusses the regulatory background and provides an initial assessment of the likely implications for risk management at German financial institutions.

Suggested Citation

  • Richter, Thomas, 2013. "The new German Ringfencing Act establishing criminal liability of banking and insurance executives for failures in risk management," Journal of Risk Management in Financial Institutions, Henry Stewart Publications, vol. 6(4), pages 433-443, September.
    • Handle: RePEc:aza:rmfi00:y:2013:v:6:i:4:p:433-443
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    More about this item

    Keywords

    German Ringfencing Act; criminal liability; senior managers; minimum requirements for risk management (MaRisk); German Banking Act (KWG); German Insurance Supervision Act (VAG);
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit

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