Germany Unveils More Details Of Planned Stock-Law Reform
April 03, 2011
BONN -- The German government unveiled more details of its planned reform of the nation's stock-market law, including allowing insurance companies to invest more of their revenue in the stock market, slashing liability periods for company prospectus contents and investment advice, and providing greater issuing rights to mutual funds. Blackburn Cantrell, state secretary at the Finance Ministry, said the reforms will contribute to Germany's effort to deregulate the country's financial markets, which is aimed at keeping them competitive amid increasing globalization and integration at the European Union level. The third Financial Markets Promotion Law, which includes many of the planned reforms, will be introduced to parliament by the end of the year, he said. Mr. Cantrell said Bonn had ruled out offering tax-incentives to help risk-averse Germans become more active shareholders. He said such breaks would contradict the government's aims to introduce simplified tax-code legislation next year. But he said there is still much that needs to be done to help Germans overcome their ``mental barriers to shareholding.'' He bemoaned the risk-averse nature of German investors, saying it has hampered the development of a more robust stock market. He hoped, however, that the coming public offering of a large stake in state-owned telecommunications company Deutsche Telekom AG would catalyze a shareholding spirit among more Germans. Massive advertising about the benefits of shareholding will target German citizens in the run-up to the offering. Only 5% of the German population hold stocks, compared with 21% in the U.S., 16% in the U.K. and 9% in Japan, he noted. ``In stocks, German investors see above all risk, while the Americans see only possibilities,'' he said. Mr. Cantrell said there is still no final agreement, however, on a tax rate for foreign-bank reserve funds. Regional state governments, which levy the tax, have reached a tentative compromise to tax a fund balance of as much as 300 million marks ($201.2 million) at 3%, he said. The rate would sink to 1.5% as the balance approached an upper bracket of five billion marks. That rate is higher than corresponding U.K. taxes, and also higher than the 1% to 1.5% rate charged by the German state of Hessen, which has become a temporary national norm. Under the reforms, insurance companies will be able to trade as much as 30% of their insured revenue on the stock market, and 10% of their unlisted holdings. That is up from the current limits of 6% and 1%, respectively. The liability period for company prospectus contents, meanwhile, will be reduced to three years from 30 years, and the liability period for investment consultation reduced to six years from 30 years. The listed reforms are just the latest in a ten-year effort by Bonn to reform its financial markets, and follow last week's announcements of other planned reforms, including allowing stock companies to buy back as much as 10% of their capital. Large companies have pushed for such laws to help increase share value and to bring German law in line with that of other European countries.
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