German banks face new levy but rules on short selling loosened

German banks face a new levy of between five and 15 per cent of their annual profits as their contribution to the cost of the financial crisis, according to a leaked draft law.

The rate of the levy will depend on banks’ business volume and how important they are to the broader banking system, said the draft. The German government hopes to raise more than €1bn per year with the new charge.

The levy would be assessed taking into account the sum of the banks’ liabilities minus the equity capital and minus non-banking contributions. Another component would be the nominal volume of off-balance sheet derivatives, the draft said.

Germany, France and Britain have said they aim to coordinate their planned banking levies.

Meanwhile German Chancellor Angela Merkel’s centre-right coalition has announced plans to water down its controversial decision to ban naked short-selling.

The government will not prohibit naked short-selling on certain day-trading transactions. The revision says short-term naked short-selling will be allowed as long as the short-selling transaction is completed by the end of the day it was initiated.