Sunday 25 September 2016

Germany wants special treatment for its banks

Birgit Jennen and Boris Groendahl

Published 06/05/2015 | 02:30

Angela Merkel knows that Enda, Michael, Joan and Brendan are pushovers. Photo: Eric Vidal/PA
Angela Merkel knows that Enda, Michael, Joan and Brendan are pushovers. Photo: Eric Vidal/PA

German Chancellor Angela Merkel's governing coalition wants the European Union to loosen rules for savings banks and cooperatives that dominate the nation's banking sector.

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The German parliament is expected tomorrow to call on the EU to spare local lenders in member states from the full brunt of new banking rules, according to a draft text obtained by Bloomberg.

The EU's plans to give companies easier access to capital markets shouldn't end up making it harder for banks to lend in the process, according to the paper by the three parliamentary leaders of Ms Merkel's governing coalition.

"Access to financing from banks shouldn't get harder because of the capital market union," German lawmakers Volker Kauder, Gerda Hasselfeldt and Thomas Oppermann wrote. "We must also think about improvements of bank financing for small companies. "Credit supply for small and medium companies from small banks can be helped if the regulatory regime is adapted for them, leaves enough freedom and the proportionality of regulation is observed."

EU financial services chief Jonathan Hill is pushing a policy to promote asset-backed securities and to lower thresholds for cross-border investments in small companies.

Credit cooperatives and small savings banks, mostly owned by local authorities are the backbone of Germany's banking industry and politically sensitive.

Credit cooperatives and small savings banks, mostly owned by municipalities with connections to lawmakers at every level of German politics, are the backbone of Germany’s banking industry. Their combined deposits exceed those of commercial banks led by Deutsche Bank AG and Commerzbank AG.

The country has clashed with the EU on multiple occasions over banking rules that it claims don’t suit this part of its banking industry. While the European Commission supports the institutions’ role as funders of small businesses, it recoils at the competitive advantages they hold over their commercial-sector peers.

The Commission has insisted that capital rules agreed on by the world’s leaders after the 2008 financial crash apply to all of the EU’s 8,300 banks, rejecting pleas for special treatment for some. Germany failed in efforts to obtain a full exemption for savings banks and cooperatives from contributing to a planned euro-area crisis fund.

Irish Independent

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