Wednesday 28 September 2016

Germany's revamped bank rules limit ECB's oversight

Birgit Jennen and Boris Groendahl

Published 18/09/2015 | 02:30

German Chancellor Angela Merkel listens to Daimler CEO Dieter Zetsche next to a Mercedes-Benz Concept IAA car during her opening tour of the Frankfurt Motor Show
German Chancellor Angela Merkel listens to Daimler CEO Dieter Zetsche next to a Mercedes-Benz Concept IAA car during her opening tour of the Frankfurt Motor Show

Germany is resisting the European Central Bank's drive to smooth out Europe's "supervisory patchwork," by retaining the right to make rules on how its own banks are managed.

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In an amendment to the nation's banking act, the Finance Ministry in Berlin will be able to issue rules on banks' recovery plans, risk management and internal decisions under a bill implementing European Union rules for winding down failing banks.

The ECB criticised a previous draft for fostering fragmentation and undermining its authority. The tweaked version seen by Bloomberg makes only minor concessions, including granting the ECB the right to be heard in some cases.

"What member countries sometimes name transposition of an EU directive sometimes goes beyond transposition of a directive," the ECB's supervision chief Daniele Nouy said this week, without explicitly referring to Germany. Lawmakers will "use the opportunity to put differences into this new banking law. So all of a sudden something that's supposedly our territory is transposed into a national law and we have to go through the national authority, or ask the national authority to do something."

Germany's amendments are part of an overhaul of its banking law, adapting national legislation to implement EU rules for resolving failing banks.

Germany's Financial Supervisory Authority, BaFin, imposes rules and standards by circulars that aren't formally binding. Under the new law, the Finance Ministry will assume this role, its decrees will be mandatory and the supervisor will have the power to punish violations. For the German banks it supervises directly, the ECB will now have to apply the rules issued by the ministry. (Bloomberg)

Irish Independent

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