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Dividend-stripping may cost German banks €1.9B, regulator says

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Dividend-stripping may cost German banks €1.9B, regulator says

Dividend-stripping transactions may cost German banks €1.9 billion, Bloomberg News reported Jan. 31, citing estimates by financial market regulator BaFin.

The estimate is based on figures provided by 24 banks involved in the transactions, also referred to as Cum-Ex, and reflects their exposure to them, the newswire said.

Based on 417 suspected cases, the German finance ministry recently estimated an even higher figure of €5.3 billion, out of which €2.4 billion has either already been reclaimed or not paid out.

The German government sees dividend stripping as a form of tax avoidance and outlawed the practice in 2012. The practice involved buying a stock shortly before losing rights to a dividend and then selling it, taking advantage of a former legal loophole that allowed both seller and buyer to claim tax credits on the dividend.

By 2016-end, 196 cases worth a total of €3 billion were suspected to be involved in the practice, deputy finance minister Michael Meister said in an answer to a letter from German lawmaker Gerhard Schick, according to the report.