German Cabinet OKs naked short-selling ban, parliament next
Posted 8h 33m ago
By Geir Moulson, Associated Press
BERLIN — Germany pressed ahead with its drive for tougher market regulation as the Cabinet on Wednesday approved a bill that would cement in law curbs on speculative trading practices — a move the finance minister said was aimed at speeding agreement on stronger European rules.
Germany's regulator rattled markets last month by abruptly banning naked short-selling of eurozone government debt and major financial stocks, as well as naked credit default swaps involving eurozone debt.
The new legislation would extend it to all stocks. Finance Minister Wolfgang Schaeuble said the governing coalition aims to send it to lawmakers quickly, but it was unclear whether it might be approved before parliament's summer break next month.
Chancellor Angela Merkel's government has stepped up long-standing calls for tighter regulation of the financial sector as Berlin and its European Union partners deal with the eurozone debt crisis — an effort that has entailed pushing through two large and unpopular rescue packages.
Politicians and many others argue that the market's behavior worsened the continent's debt crisis.
The initial ban on naked short-selling rattled financial markets, with analysts saying unilateral action by one government suggested lack of unity in combating the market turmoil from Europe's government debt crisis.
Short-selling is a way of betting an asset will go down by borrowing securities and selling them in hopes of buying them cheaper later. Naked short-selling involves selling shares without first borrowing them.
Some market watchers say most such trading is conducted outside Germany, and Schaeuble said Wednesday that Berlin's move, which applies only to domestic markets, effectively bans naked short-selling only of German and Austrian government debt.
"The criticism made of our plans that we are impairing trading of other European government bonds is unfounded," Schaeuble argued. He added that the legislation will allow his ministry to authorize exceptions.
Schaeuble said he acted after hearing that the European Commission wouldn't be able to propose rules on naked short-selling before October.
He noted that a German decision earlier this year to introduce a levy on banks, which would pay into a fund to cover the costs of future financial crises, was followed by European proposals.
"If member states move ahead on certain questions, those aren't solo attempts that in the end weaken joint action in Europe, but they serve — at least in the [German] government's understanding — the aim of speeding up European decisions," Schaeuble said.
The government is unlikely to face trouble winning support for the ban. The main opposition parties have pushed for stronger market regulation and have welcomed the planned legislation as an overdue signal.
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