Monday

27th Feb 2017

Bundesbank wants treaty change for banking union

  • Germany's central bank is an influential member of the ECB (Photo: Bundesbank)

Germany's Bundesbank is concerned about the European Central Bank's mix of powers once it takes over supervision of banks next year, insisting on an EU treaty change as soon as possible.

In its July report published Monday (22 July), the Bundesbank welcomed the creation of the so-called banking union, pooling at eurozone-level the supervision of large banks and, at a later stage, the power to tell banks to close down when they run into trouble.

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"The banking union cannot solve the current crisis, but can bring a valuable contribution to making future crises less probable," the Frankfurt-based bank said in its report.

The Bundesbank is sceptical about the legal anchoring of the Single Supervisory Mechanism (SSM), questioning whether the European Central Bank can have the ultimate say in bank supervision, while preserving its monetary policy independence.

The setting-up of supervisory boards as well as assurances by ECB chief Mario Draghi that the two activities will have a "Chinese wall" inbetween have failed to convince the Bundesbank.

"An effective separation of monetary policy tasks and supervisory tasks is not possible without changes to the institutional framework of the ECB, as enshrined in the EU treaties," the report reads.

A further concern is that non-eurozone banks are not included in the new supervisory system: "A truly European banking supervisor, that would cover the entire single market, should comprise of a binding, single banking supervisor for all EU members."

The Bundesbank urges politicians to "swiftly" proceed with EU treaty change that would put the banking union on a solid legal base.

But such a process usually lasts a few years and opens a whole set of different requests from member states and the European Parliament, which would also be involved in the process.

Who pays the bills in a banking union?

The European Commission published the most important and eagerly awaited piece of the banking union puzzle on Wednesday but the backlash was predictable.

Greece and creditors break bailout deadlock

Athens agreed on budget cuts worth up to €3.6 billion and extracted some concessions from creditors, but the IMF warned the package might not be enough.

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