Ex-German finance minister calls for PE lending ban

The politician outlined his plans, entitled "Regaining trust: a new attempt to restrain financial markets" to the press in Berlin on Wednesday.

In a speech he referred to the financial crisis, blaming the industry for being out of control and having caused distrust in contemporary politics. He said: "Accountability and risk don't add up anymore as profits are privatised and losses are socialised."

He called for greater regulation of the industry which should include not only the Europe-wide financial transaction tax but a withdrawal of governmental guarantees from banks involved in financial activity other than retail banking. He further proposed to split investment banking activities from retail banking, prohibiting any credit exchange between the two and effectively stopping banks from becoming involved in private equity buyouts.

He also suggests a Europe-wide regulator should be created and tighter regulation for what he called "shadow banks", currently unregulated financial credit institutions that can operate without banking licences. These banks, if failing, should be bailed out by a European bank-backed bond, he suggested.

Managing director of the German Private Equity and Venture Capital Association (BVK) Ulrike Hinrichs expressed her disappointment with the former minister's proposed plans. In a statement she said: "We are disappointed with the proposals put forward by Steinbrück. Private equity houses are not shadow banks but provide important capital for businesses, especially small- and medium-sized ones."

The BVK was also quick to point out that private equity was already regulated by the incoming AIFMD.

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