Part III Civil Law Legal Systems, 3 Germany

Subject(s):

Regulatory liability of lenders — Bank resolution and insolvency — Bank supervision — Credit — Investment business — European Central Bank — European Securities and Markets Authority (ESMA)

This chapter explores the fundamental principles for liability of supervisory authorities within Germany, which essentially follows more general patterns of state liability for negligent breaches of duties by public officials more generally. As guaranteed by the German Constitution, the state will be liable if a public official, when discharging his or her duties under administrative law, is found to have breached a duty towards individuals (or companies) and has done so at least negligently. As a consequence of legislation introduced in the aftermath of the Herstatt failure in 1974, however, financial supervisors under German law are generally deemed to discharge their duties only ‘in the public interest’, which effectively precludes liability towards individuals. The chapter explains the background and the consequences of that doctrine, and discusses whether liability might nonetheless arise in the context of obligations enshrined in European law.