Thursday

22nd Feb 2018

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.

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

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The leaders of Estonia, Latvia, and Lithuania say in a joint letter that they are open to talks on creating "new own resources" for a bigger EU budget after the UK leaves the EU.

Opinion

Greek government's steady steps to exit bailout programme

Growth predictions are positive, exports increasing, unemployment dropping and credit-ratings up, says the head of Greece's Syriza delegation to the European Parliament. Now the government in Athens is looking to design its own reform programme.

Analysis

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Talks on the next EU budget will start on Friday. Brussels wants to do much more than before – and needs a lot more money. But arguing about funds won't be enough.

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