Last month, without much fanfare, Germany’s Bundestag passed a new banking law which will come into effect on January 1, and which investors say will have far-reaching implications for bondholders who face the possibility of a severe haircut in times of trouble.

The Bank Restructuring Law includes several new measures that aim to protect the German banking system and to limit the amount of taxpayer support the system can expect. The measures include a banking levy, where banks will contribute towards a fund which will eventually reach €70bn, which will be used to bail out troubled banks.