Tuesday 23 January 2018

Power struggle as Germans push to take lead role at ECB regulator

Michael Noonan: sits on ECB's Governing Council
Michael Noonan: sits on ECB's Governing Council
Sarah McCabe

Sarah McCabe

THE first signs of a power struggle are emerging at the new European body that will take over direct responsibility for regulating Bank of Ireland, AIB and Permanent TSB from next year.

A deal has reportedly been reached that will pave the way for German bankers to take on roles at the new European Central Bank agency to ensure a German supervisory approach takes hold – despite the fact that the regulator is supposed to be independent.

According to German newspaper 'Welt Am Sonntag', the deal will allow workers from Germany's central bank, the Bundesbank, to keep their civil service status while taking on roles at the new ECB regulatory division.

It will also allow Bundesbank workers to return to their old jobs after three- to five-year stints. Normally, only temporary contracts are offered for new ECB employees. The deal also extends to workers at German financial regulator Bafin.

The Bundesbank is even willing to let its most senior bankers to take on roles at the new organisation, according to the newspaper, in order to introduce a German supervisory approach at European level.

The news is the most public attempt yet by a member state to ensure it is represented at the new regulatory body, which will take over direct responsibility for 130 of Europe's biggest banks from October next year.

It will also play a lesser role in regulating Europe's smaller banks, in co-operation with national authorities.

The regulatory power only recently began the recruitment process for 800 staff, many of whom will come from national central banks.

Some of these people will ultimately take on roles directly within the three biggest Irish banks, replacing existing supervisory staff.

'Welt am Sonntag' reports noted that other member states outside of Germany are keen to fill leadership roles, too. Ireland's central bank has only said that its employees may be exchanged and seconded to other countries as part of the new regime. No other details have yet been made public.

The new ECB regulator was designed to be an independent organisation, whose primary aim is to sever the link between member states and their banks.

Reforms

It ultimately reports to the ECB Governing Council, whose members include Michael Noonan and the other finance ministers of the eurozone's members.

It will take control of key tasks such as revoking banking licences and approving major sales of bank shares. It is being introduced as part of sweeping reforms aimed at tackling the Eurozone's troubled banking industry.

Bank of Ireland, AIB and Permanent TSB all fall under its remit.

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