German Economic Minister Karl-Theodor zu Guttenberg proposed a plan that would allow financial regulator BaFin to restructure and manage financial institutions it deems at risk of insolvency. However, the plan is running into problems regarding international contracts. "German regulatory provisions can only prevail if the U.K. or U.S. courts recognize their provenance," said one banking partner. "BaFin is looking at banks in an isolated way, possibly depriving them of foreign hedging and lending contacts that would help them survive through a restructuring."

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