Tuesday

26th Jul 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.

EU to tweak rules on Chinese 'dumping'

The EU Commission has tried to fudge the issue of whether China is a “market economy” amid efforts to protect European industry from cheap exports.

Court ruling puts Renzi bank plan in doubt

EU court ruling on bank bailouts has raised the likelihood of a political embarrassment for Renzi, months before a referendum puts his future and, potentially, Italy’s euro future on the line.

Stakeholders' Highlights

  1. Belgrade Security ForumMigration, Security and Solidarity within Global Disorder: Academic Event 2016
  2. GoogleHow Google Fights Piracy: Creating Value While Fighting Piracy
  3. EJC"My Visit to Israel" - Opinion by MEP Lopez Aguilar, Chair of the EP Working Group on Antisemitism
  4. World VisionChildren Migrating, Out of School and at Work as Hunger Deepens in Southern Africa
  5. European Healthy Lifestyle AllianceStand-Up (and Exercise) to Prevent Chronic Diseases
  6. Centre Maurits CoppietersLaunches a Real-time News Hub Specialised in EU Stakeholders
  7. Dialogue PlatformFethullah Gulen Calls for International Probe Into Turkey Coup Allegations
  8. GoogleEU-US Privacy Shield: Restoring Faith in Data Flows and Transatlantic Relations
  9. World VisionWorld Leaders & Youth Advocates Launch Partnership to End Violence Vs. Children
  10. Counter BalanceReport: Institutionalised Corruption in Romania's Third Largest Company
  11. Access NowEuropol Supports Encryption. We Can Relax Now… Right?
  12. GoogleLearn about Google's projects across Europe on Twitter @GoogleBrussels