THE BLOG
09/23/2014 01:26 pm ET Updated Nov 22, 2014

German Financial Supervision: Enforcement Deficits

While the United States imposes a billion penalties after another, we let banks get away easily, although they have caused massive economic and social damages. Why?

In the U.S., hardly a week in summer goes by without a billion new penalties being imposed on banks. In the end of August, it was announced that Bank of America would pay a record sum of $16.65 billion, because they sold risky financial products prior to the financial crisis.

Even Goldman Sachs, JP Morgan Chase, the French bank, BNP Paribas, and some other financial institutions have to pay billions due to current comparisons. Thus, the U.S. authorities prosecute various dubious business practices.

And what about the situation on our side of the Atlantic? In Europe, especially in Germany, banks have manipulated the interest rates, hawked risky products or helped tax evaders. Too often, they are free to buy with petty cash.

Compared to the United States itself, the sum of 725 million euro is low, to which the EU had, in 2013, sentenced a German bank for cartel-like arrangements in interest rates. Seriously: This is not likely to be fined by the Financial BaFin, added that they will soon complete their studies.

But, those hoping for a decent amount are expected to be bitterly disappointed: BaFin comes too often, therefore, as a toothless tiger. Fines on banks are generally below the limit of 10,000 euros; only now and then they are five-digit sums.

Even if the Financial Supervisory Commission has recently tightened their guidelines regarding and interest rate manipulations, it should go beyond the current level, you have to be stated: Penalties, fines and imposed on banks in this country are often disproportionate to the gravity of guilt, and certainly not to the economic and social damage that has been caused because of their business practices, just the great financial houses.

Now to continue with the example of interests: At the high criminal energy, manipulated records, especially the Libor and Euribor that are the worldwide bases for interest rates of financial products, derivatives and loans. Private clients, municipalities, companies and small banks have, therefore, been severely damaged.

I will not enter into details at this point on the losses incurred by depositors and commission-driven wrong selling. The examples make it clear that we have a huge lack of enforcing measures against criminal offenses, misdemeanors and violations of obligations in the banking sector in Germany. Because, we have not only the banks themselves come cheap thereof - also the responsible bank managers cannot usually be held accountable because of high criminal and civil legal hurdles.

This current process wave is shown more clearly than the one shown during the wake of the financial crisis: officers of BayernLB, HSH Nordbank & Co. were usually acquitted or came with manageable money requirements thereof.

The federal government must respond to this alarming constitutional development. It must be ensured that banks are not allowed to keep their ill-gotten gains, especially since the situation of many financial institutions now look good again. For this, we should orient ourselves to the USA. There are not only individuals, but also companies that can be punished, while in this country, they only fear fines for their "offenses." In addition, the U.S. authorities take due penalties and settlement payments. Large sums are thus proportionate to the amount of damage that has been done. These are sums that are incidentally used wisely such as to finance a higher level of consumer protection or for infrastructure projects. This country does away with bulk coalition partners on this source of income, and, currently, prefers to think about creating incentives for banks and insurers to invest on roads and power lines.

In my opinion, they should rather promote another project: corporate criminal law. Because if we punish companies themselves and not only for "offenses" that are payable monetarily, significantly larger sums would be due. This is long overdue, given the increasingly apparent outcropping enforcement deficit in the area of economic crime.

A proposal made by North Rhine-Westphalia has long been on the table. And, on the part of economic mantra, repeated warnings of the "death penalty" for companies are misleading: it's not about to pushing banks into bankruptcy, but rather skimming unlawful profits and giving back to society.