Tuesday

3rd May 2016

Bundesbank sceptical on EU banking union

  • Bundesbank chief Jens Weidmann is "not convinced" the ECB is the best institution to supervise banks (Photo: Chatham House)

Germany's central bank has poured cold water over a recently agreed deal of putting the European Central Bank (ECB) in charge of supervising banks in the eurozone.

A legal opinion by the Bundesbank, seen by Der Spiegel magazine, raises concerns over the landmark deal reached last week by finance ministers to put the ECB directly in charge of 150-200 of the largest banks in the eurozone, along with new auditing powers for the rest of the 6,000 banks which remain under national supervision.

Dear EUobserver reader

Subscribe now for unrestricted access to EUobserver.

Sign up for 30 days' free trial, no obligation. Full subscription only 15 € / month or 150 € / year.

  1. Unlimited access on desktop and mobile
  2. All premium articles, analysis, commentary and investigations
  3. EUobserver archives

EUobserver is the only independent news media covering EU affairs in Brussels and all 28 member states.

♡ We value your support.

If you already have an account click here to login.

The current deal lacks "a long-term solid legal basis," as a planned mediation committee between the banking supervisor and the ECB governing council may be attacked in EU courts, the Bundesbank said.

The mediation committee was a compromise introduced at the last-minute in order to meet German demands for not making the ECB automatically responsible for mishaps it cannot directly supervise.

The mediation committee is supposed to intervene when the ECB governing council (eurozone-members only) and the banking supervisor, which will include non-euro representatives, have diverging views on a particular bank, for instance if it should boost its capital reserves.

Meanwhile, Bundesbank chief Jens Weidmann has also expressed scepticism if the ECB is the right institution to supervise banks.

"I am not convinced that the ECB council is the optimal authority to decide when a bank has to be closed down or not," he told the economic weekly Wirtschaftswoche.

He reiterated concerns that the ECB's core task of overseeing the stability of the common currency and the banking supervision activities are not sufficiently separated to ensure the independence of this institution.

Weidmann also criticised plans agreed by EU leaders to complete the so-called banking union with a "resolution" authority able to close down banks and use taxpayer money until a fund based on contributions from the banks themselves is set up.

Such a banking union spreading the risks onto taxpayers in the eurozone should have democratic controls, he said.

But in a more conciliating mode than his legal service, Weidmann suggested the new set-up, expected to become operational in 2014, could be launched as a transitional arrangement. "The ECB can take over the role of a midwife, until the banking supervisor will be able to be separated from the central bank," he said.

Putting the ECB in charge of banking supervision was initially a German demand, after Chancellor Angela Merkel slammed the existing European Banking Authority - a less powerful body set up two years ago and whose so-called stress tests on EU banks failed to see the problems in the Spanish banking sector.

The EBA's powers were watered down by the EU governments themselves however, who wanted to retain as much sovereign powers for their national supervisors as possible.

A new set of "stress tests" will be jointly run by EBA and the ECB in the second half of next year, even before the new supervisor is to be set up, Austrian central bank chief Ewald Novotny said Friday.

"What we want to avoid is that there are isolated stress tests from EBA and then from the ECB. We said we should move ahaead in a coordinated way," he said.

News in Brief

  1. Delays as Brussels airport reopens terminal
  2. MEPs urge extra sanctions on Russian officials
  3. Poland's right-wing leader wants constitutional overhaul
  4. Don't silence media, Council of Europe tells countries
  5. Eurostat: 88,300 lone minors among refugees
  6. EU unemployment lowest in seven years
  7. Nord Stream II will undermine EU security, EPP leader says
  8. Brussels Airport reopens departure hall after attack

Stakeholders' Highlights

  1. European Music CouncilRegister Now for the 6th European Forum on Music in Wroclaw, European Capital of Culture 2016
  2. Belgrade Security ForumJoin Our Team for the 6th Belgrade Security Forum. Apply Now! Deadline May 20
  3. European Roundtable of IndustrialistsCompanies Make Progress on Number of Women in Leadership Roles
  4. Counter BalanceParliament Gets Tough on Control EU Bank's Funds
  5. ICRCSyria: Aleppo on the Brink of Humanitarian Disaster
  6. CESIWorld Day For Health and Safety at Work: Public Sector Workers in The Focus
  7. EFABasque Peace Process-Arnaldo Otegi Visits the European Parliament
  8. EscardioChina Pays Price of Western Lifestyle With Soaring Childhood Obesity
  9. Centre Maurits CoppetiersThe Existence of a State is a Question of Fact, Not a Question of Law
  10. Martens CentreJoin Us at The Event: Prospects For EU Enlargement After 2019
  11. ICRCSyria: Aid for Over 120,000 People Arrives in Besieged Town Near Homs
  12. Counter BalanceHighway to Hell: European Money Fuelling Controversial Infrastructure Projects