German Election #6: The coalition agreement of the new German government - what’s in it for financial services?

Unsurprisingly, and in line with current developments at the European level, the new government advocates further strengthening the European Capital Markets Union (or, according to the new terminology, the Savings and Investment Union).

The statements on deposit protection are, however, more interesting. In this context, the coalition agreement emphasizes that the interests of smaller banks and savings banks should consistently be taken into account when discussing changes to regulation. A common European deposit guarantee scheme is generally rejected. 

This was not necessarily to be expected after various representatives from the savings bank sector had recently spoken out in favor of opening up the discussion, indicating a shift of sentiment in Germany. In the past, concerns had been expressed that a European Deposit Insurance Scheme (EDIS), among others, could incentivize Member States with fragile banking sectors to take on more risks to the detriment of German depositors.

As a recap: The EDIS proposal of the EU Commission, published in 2015, was meant to create the ‘third pillar’ of the Banking Union. It envisaged a pan-European deposit protection scheme to be introduced in three stages. However, negotiations in the EU Council on EDIS have been suspended for a long time.

In June 2022, after intense and controversial debates which did not lead to a joint position, it was agreed to initially focus on strengthening the framework for bank crisis management framework and deposit insurance (CMDI). The CMDI package, which was proposed by the EU Commission on 18 April 2023 and is currently being negotiated in trilogues, does not make a new push for a pan-EU deposit protection scheme, but instead proposes new rules regarding depositor protection to harmonize and clarify the existing framework (see for further details regarding the proposal our blogpost). EDIS and other elements should only be discussed subsequently and by consensus among the Member States. Considering the statements in the new coalition agreement, Germany’s position in this respect seems to be clear!

The competitiveness of the German economy has been a key concern for the CDU/CSU during their election campaign. It therefore does not come as a surprise that the competitiveness of the German and EU financial markets is specifically addressed in the coalition agreement. This is also in line with frequent demands from the financial industry criticizing German goldplating of EU law requirements, a lack of digitalization of German ministries and supervisory authorities, as well as bureaucratic complexity and red tape.

The new government is “committed to a unified European financial regulation and, in this context, will also refrain from goldplating”. It thus appears to explicitly support some of the core statements of the von der Leyen II Commission in the context of financial services. Ursula von der Leyen herself noted that “we have a very clear signal from the European business sector that there is too much complexity, the duration of permitting is too long and administrative procedures are too cumbersome. We have to cut red tape. We will deliver an unprecedented simplification effort” (see our separate blogpost for an overview on the impact of the von der Leyen II Commission on financial services).

Yet, the coalition agreement remains vague on what the new government’s plans in this context are and how it aims to achieve these plans. The express reference to goldplating raises the question whether the new government will not only refrain from goldplating going forward but will also review where Germany has goldplated EU law in the past. An obvious example of this practice is the implementation of MiFID 2 in Germany.

Germany has often been hailed to be a haven for money laundering activities. The former German finance minister Christian Lindner referred to it as a “money laundering paradise”. Accordingly, the FATF found in its 2022 assessment of the German anti-money laundering (AML) regime that, among others,

• the domestic coordination across Germany’s 16 states is a challenge and coordination and consistency between the different supervisory and law enforcement authorities should be enhanced;
• priority should also be given to mitigating the risks associated with the high use of cash in the country and the use of informal money or value transfer services;
• Germany needs to continue to prioritize its reforms of the financial intelligence unit (FIU) at the operational level and continue to enhance the collection, analysis, dissemination and use of financial intelligence; and
• Germany needs to adequately resource its over 300 AML supervisors and the transparency register.

The coalition agreement directly addresses the FATF report and announces “decisive improvements” ahead of the next FATF assessment, which – for the most part – appear to be a direct response to the above issues. The new government envisages, among others, 

• improving the coordination and exchange between federal and state level authorities, national and international organizations as well as the new European AML authority AMLA (see our separate blogpost for an overview on AMLA);
• closing gaps in the transparency register. Where one or more ultimate beneficial owners cannot be determined, obliged entities must not carry out transactions of legal entities in excess of 10,000 euros; and
• introducing a suspicious wealth order tool which shall allow authorities to confiscate assets of significant value, where there are doubts about the legality of their acquisition. 

Unsurprisingly, the use of cash is also mentioned in the coalition agreement. The new government aims to ensure that “everyone can continue to decide for themselves how they pay for everyday transactions. We will maintain cash as a common form of payment.” It remains to be seen whether and how these statements will be taken up by the FATF, which could at least take  comfort from Germany’s existing ban on cash payments for the acquisition of real estate assets and the upcoming general ban on cash payments over 10,000 euros under the AMLR.

The new government’s statements on the future availability of cash payments are undoubtedly driven by public demand. Cash is still the most common form of payment used for over-the-counter purchases (in 2023, a Bundesbank study found that 51% of these payments were settled in cash). The same study revealed that a majority of respondents would like to carry on being able to use cash in the future. However, the coalition agreement also envisages that “at least one digital payment option” shall gradually be offered in addition to cash. If Germany were to introduce a mandatory digital payment option to be offered by merchants, this could trigger a boost for the payment industry in Germany. For the time being, however, it remains unclear how, when and if such mandatory payment offer will be introduced, and whether such an obligation will also apply to novel payment options, such as payments by QR code or with crypto-assets, in addition to debit/credit card payment products. 

The coalition has also agreed to support the introduction of a digital Euro for consumers in both wholesale and retail markets, that complements cash, protects consumer privacy, is free for consumers to use, and does not impair financial stability. The decision for the introduction of a digital euro would, of course, be taken in Brussels (and Frankfurt), and not in Berlin. For an overview on the digital Euro proposal, see our separate blogpost.

Investments in infrastructure, renewable energies and venture capital are one of the key themes of the coalition agreement, not only with respect to public investments by the “Deutschlandfonds” but also with a view to private capital deployment through fund investments. 

To this end, the agreement announces to “establish a framework for fund investments in infrastructure and renewable energies that is reliable and competitive in the EU, including by targeted amendments to applicable tax laws”. This statement likely alludes to the discussion draft published by the Ministry of Finance on 21 May 2024 for a new law promoting fund investments in renewable energies and infrastructure (see our Client Briefing), which provided for clarifications in the German Capital Investment Code (Kapitalanlagegesetzbuch, KAGB) and the German Investment Tax Act (Investmentsteuergesetz, InvStG) on investments in infrastructure, as well as the proposed amendments to the InvStG with regard to investments in renewable energies and infrastructure in the government draft bill of a 2nd Future Financing Act (Zukunftsfinanzierungsgesetz, ZuFinG) of 27 November 2024. These draft laws were intended to create an attractive and reliable investment framework for indirect investments in renewable energies and infrastructure via investment funds and may be taken up again, in this or an amended form, in the new legislative period. 

The statement also ties up with the recent changes to the Investment Ordinance (Anlagenverordnung, AnlV) which established additional investment capacities of pension schemes and small insurance companies (i.e. those not subject to the Solvency II framework) for infrastructure and venture capital investments (see our Client Briefing). The coalition intends to create more incentives to invest in infrastructure and venture capital also for Solvency II companies as they announce to “activate several billions of Euros” by lowering the solvency capital requirements for these purposes in the context of the current Solvency II revision. They add that they intend to “abolish, where possible, additional national capital buffers”, a statement that will draw attention not only from insurance companies. Moreover, institutional investors’ capabilities to provide venture capital shall be improved in order to make Germany more attractive for start-ups.

Consumer protection plays an important role throughout the coalition agreement. An interesting example of this is the section on fees on payment accounts with basic features and overdraft facilities, in relation to which the new government wants to assess whether fee caps should be introduced in order to enforce adequate and market-standard fee caps. 

German/EU law already provides that banks may only charge reasonable fees for payment accounts with basic features. The reasonableness is determined taking into account the usual and user behavior. To this end, BaFin published a website in January 2025 that allows consumers to compare fees and other conditions for payment accounts. On average, the fees amount to approx. 27 euros - the highest in the EU, according to a recent report.

Similarly, fees for overdrafts are also often in the news for being too excessive. A 2024 Finanztest report found that some banks charge up to 17.2 % overdraft interest rates, noting that “anything above 15% is inacceptable”. According to the news outlet Finanzszene, the effective interest rate in February 2025 was, however, significantly lower (10.3%).

Nonetheless, the new government only wants to assess whether fee caps should be introduced. A decision on this issue will therefore be formally postponed until another day. In practice, the introduction of a fee cap on overdrafts seems rather unlikely under the new government, as  both CDU/CSU and SPD rejected a proposal for a fee cap quite strongly only in 2023.

The coalition agreement also presents an approach in respect of the so-called ‘legacy funds’ (‘Altmittel’), i.e., the portion of the German Restructuring Fund’s assets, which can be traced back to the national bank levies from 2011 to 2014. During the build-up of the Single Resolution Fund, these national funds were retained in the Restructuring Fund to serve as an additional buffer. With the end of the Single Resolution Fund’s build-up period on 31 December 2023, a discussion on the future use of the retained funds arose.

The coalition agreement now states that the funds in the amount of 2 billion euros shall be utilized to support the digital and climate-neutral transformation of German ‘Mittelstand’  businesses in cooperation with the German financial institutions. They shall be used to co-finance a promotional fund which shall be capable of providing up to 10 billion euros of equity and debt capital.

The German law on General Terms and Conditions (GTCs) is particularly burdensome. Judicial review of GTCs is a significant source of uncertainty. Courts may strike down clauses that are widely used and well established based on a substantive review and applying broad principles. Even careful drafting and legal review cannot fully address legal risks because courts may develop an interpretation of unfairness or transparency that has not been considered or that, while having been considered, was not deemed likely against the body of available case law. Unlike in other EU jurisdictions, in Germany this uncertainty is not limited to contracts with consumers but also applies to contracts between professional parties – a further example of excessive German goldplating. In the past, this often constituted a significant risk factor for the financial industry, which often switched to English law governed contracts as a consequence (where possible).

In 2023, the German legislator already sought to address this uncertainty with an express carve-out for the financial services industry (section 310(1a) BGB). While the intention was welcomed, the implementation appeared to be overly complex, which led representatives of the financial industry to attest that significant changes to standardized agreements used in the financial industry appear to be unlikely. 

Against this backdrop, the coalition agreement now appears to provide for an (unconditional) GTC review carve-out for all agreements between large undertakings (as defined in accounting law). The coalition agreement leaves open, however, how the new government envisages implementing such carve-out. Among others, it will need to be ensured that the exclusions for financial services that the German civil code already provides for, will not be rolled back.