Frankfurt -- The lower house of Germany's parliament said Friday it had approved a law that reinforces the financial market regulator Bafin, giving it stronger powers to stabilise German banks.

Bafin will be able to require banks and other financial institutions to increase cash buffers or minimum reserve requirements to protect against excessive risk-taking and the threat of a collapse.

The law, voted in the lower house Bundestag, was inspired by the troubled property lender Hypo Real Estate, which had to be saved last year through a joint effort by the state and private banks.

It will also be easier for Bafin to block the payment of dividends or credits, as well as the transfer of shareholders' funds from one division of a financial institution to another.

That is meant to prevent funds in German financial firms from being soaked up by troubled institutions linked to them in other countries.

The composition of supervisory boards may change as well, allowing people from outside a financial institution, such as members of local authorities or business leaders, to serve on its board.

German Chancellor Angela Merkel warned Friday in a press interview that governments would fight off any attempt by banks to water down tough reforms of financial regulations.

"There is perhaps a certain danger that banks which are doing quite well again might try to not exactly support the regulation efforts, but to put them in doubt again," Merkel told the Wall Street Journal Europe.

"I don't see that they have a chance of succeeding, either with the American administration, nor in the European Union," she added.

AFP/Expatica