Sunday

19th Jan 2020

Banking union: The German way or no way

  • The German parliament will have to approve any deal on the banking union (Photo: Valentina Pop)

A deal on the planned single supervisor for banks in the eurozone will come about only if it meets German demands limiting the European Central Bank's (ECB) responsibility.

EU ambassadors in Brussels were set to meet Monday evening (10 December) for what diplomats said would most likely be an "all-nighter" in a last attempt to thrash out a compromise on the banking supervisor before a gathering of finance ministers on Wednesday dedicated to the topic.

Read and decide

Join EUobserver today

Support quality EU news

Get instant access to all articles — and 20 years of archives. 30-day free trial.

... or join as a group

At the core of the dispute is Germany's view that the ECB should not be made responsible for overseeing all 6,200 banks in the eurozone, as the EU commission, France and the ECB are advocating for, but rather for national supervisors to bear the responsibility for things going wrong in the smaller banks and for the ECB overseeing just the lager ones.

Non-eurozone countries have also raised concerns about voting rights and a level playing field between banks inside and outside the new supervision scheme. But according to an EU source, "if Germany agrees, others like Poland, will follow."

Initially, the idea of having a single supervisor came from no other than German Chancellor Angela Merkel.

Back in June, when Spain and Italy were struggling with sky-high borrowing costs and pressuring Merkel to agree for the eurozone bailout fund to be used for bank bailouts without governments having to pile on more debt, she agreed, but only if banks would first be put under the supervision of the ECB.

The existing European Banking Authority (EBA) - set up in the aftermath of the financial crisis and supposedly doing the same thing for banks in all 27 EU countries - proved to be inefficient, Merkel said, as it had failed to see the Spanish banking problems in time and gave them a clean bill of health in its so-called stress tests.

Yet the powers of the London-based EBA were watered down by member states, so that it cannot run its own audits to check whether what national supervisors are reporting, for instance about Spanish banks, is actually true.

That same debate seems to be doing the rounds this time.

The ECB should be fitted with real auditing powers, says Germany. But it also argues that no single supervisor can possibly be put in charge of 6,200 banks from Estonia to Portugal and from Ireland to Greece. Instead, national supervisors should still bear the responsibility for smaller ones, with only the large ones under direct ECB control.

A draft compromise prepared by the Cypriot EU presidency on Friday placed banks with assets worth more than €30 billion and doing cross-border activities under ECB supervision, all the rest staying under day-to-day national supervision. But the ultimate responsibility would still lie with the ECB.

German finance minister Wolfgang Schaeuble on Sunday indicated willingness to achieve a compromise "before Christmas" and to work on the actual setting up of the new body in 2013, but insisted for the ECB not to be made responsible for things it cannot oversee.

Spiegel magazine meanwhile reported that a compromise could also envisage placing the new supervisory body in Paris, to clearly underline the separation of activities within the Frankfurt-based ECB.

EU diplomats told this website the headquarters issue is the "least of our problems," even though Germany prefers for the supervisor to be "in the proximity" of the ECB in Frankfurt.

Germany's central bank chief Jens Weidmann - also based in Frankfurt - has meanwhile told Welt am Sonntag that the legal base finance ministers and the European Parliament are working on is not right and an EU treaty change would be the "legally clean solution" for the ECB to be entrusted with all these new powers.

EU treaty change means delaying the process for at least a few years.

The German government, however, maintains that the current legal base is fine and no treaty change is needed. But the bigger the ECB powers and the less democratic accountability the new set-up has, the more difficult it will be for the German parliament to approve the deal, Schaeuble has warned.

Draghi seeks to allay German concerns on banking union

European Central Bank chief Mario Draghi sought to downplay a clash of views with the German government over the scope of a new banking supervisor by suggesting a bigger role for national supervisors when it comes to small regional banks.

Franco-German rift derails banking union deal

EU finance ministers will return to Brussels on the eve of the December EU summit next week for last ditch talks on the controversial banking union proposals, after failing to reach agreement on Tuesday.

Germany denies stalling on banking union

The German government has denied putting the brakes on the eurozone's "banking union," but says it would require an EU treaty change which could take years.

News in Brief

  1. 'No objection in principle' on Huawei cooperation, EU says
  2. French aircraft carrier goes to Middle East amid tensions
  3. EU suggests temporary ban on facial recognition
  4. EU industry cries foul on Chinese restrictions
  5. 'Devil in detail', EU warns on US-China trade deal
  6. Trump threatened EU-tariffs over Iran, Germany confirms
  7. EU trade commissioner warns UK of 'brinkmanship'
  8. Germany strikes coal phase-out deal

Feature

Promises and doubts: Africa's free-trade adventure

The EU is hoping that a continent-wide free trade agreement in Africa will help lift millions out of poverty and help solve issues of security and migration. But its message of values and equal partnership do not resonate with everyone.

Opinion

Why von der Leyen must put rights at core of business

Ursula von der Leyen's in-tray must include those European executives on trial for systematic workplace harassment, the break-up of European slavery rings, and allegations of European companies' abuse in palm oil, including child labour, land grabs, and deforestation.

Stakeholders' Highlights

  1. Nordic Council of Ministers40 years of experience have proven its point: Sustainable financing actually works
  2. Nordic Council of MinistersNordic and Baltic ministers paving the way for 5G in the region
  3. Nordic Council of MinistersEarmarked paternity leave – an effective way to change norms
  4. Nordic Council of MinistersNordic Climate Action Weeks in December
  5. UNESDAUNESDA welcomes Nicholas Hodac as new Director General
  6. Nordic Council of MinistersBrussels welcomes Nordic culture

Stakeholders' Highlights

  1. UNESDAUNESDA appoints Nicholas Hodac as Director General
  2. UNESDASoft drinks industry co-signs Circular Plastics Alliance Declaration
  3. FEANIEngineers Europe Advisory Group: Building the engineers of the future
  4. Nordic Council of MinistersNew programme studies infectious diseases and antibiotic resistance
  5. UNESDAUNESDA reduces added sugars 11.9% between 2015-2017
  6. International Partnership for Human RightsEU-Uzbekistan Human Rights Dialogue: EU to raise key fundamental rights issues

Join EUobserver

Support quality EU news

Join us