Ger­man banker gains sup­port for nar­rower bank­ing union

The Pak Banker - - Front Page -


Ge­org Fahren­schon, who led Ger­many’s sav­ings banks in help­ing quash a pro­posal for Europe-wide de­posit guar­an­tees, is now seek­ing to limit the re­main­ing as­pects of a Euro­pean bank­ing union: a joint res­o­lu­tion fund and cen­tral su­per­vi­sion of all the re­gion’s lenders.

“I’m hard put to find any­one who speaks in fa­vor of com­mon Euro­pean de­posit in­sur­ance these days,” Fahren­schon said in an in­ter­view in Frankfurt on Nov. 9. He stepped down as Bavar­ian Fi­nance Min­is­ter last Novem­ber and be­came pres­i­dent of the Ger­man sav­ings banks as­so­ci­a­tion, or DSGV. “It’s a com­monly held mis­con­cep­tion that bank­ing su­per­vi­sion, bank­ing res­o­lu­tion and de­posit in­sur­ance all has to be struc­tured cen­trally via Europe.”

Ger­many’s 423 sav­ings banks and 11 lan­des­banks pro­vide 43 per­cent of the loans to the small- and mid-sized com­pa­nies, known as Mit­tel­stand, that power the coun­try’s ex­port-driven econ­omy. The lenders op­pose a joint li­a­bil­ity plan be­cause they say it would put Ger­man de­pos­i­tors at risk over bank res­cues in coun­tries like Spain, where a real-es­tate col­lapse forced the gov­ern­ment to seek a Euro­pean Union bailout for its bank­ing sys­tem.

“Our man­date is against that,” said Fahren­schon, 44. “The sav­ings banks have a man­date to op­er­ate re­gion­ally by tak­ing de­posits and lend­ing re­gion­ally.”

Sav­ings banks make up one of the three pil­lars of Ger­many’s fi­nan­cial sys­tem, which also in­cludes more than 1,100 co­op­er­a­tive lenders and com­mer­cial banks such as Deutsche Bank AG (DBK) and Com­merzbank AG. (CBK)

As Euro­pean pol­icy mak­ers at­tempt to ham­mer out the shape of a bank­ing union, one ques­tion is whether lenders should be over­seen by na­tional reg­u­la­tors or the Euro­pean Cen­tral Bank. Fahren­schon is find­ing in­creas­ing sup­port at home for keep­ing sav­ings and co­op­er­a­tive lenders out­side a Europewide union.

Ger­many, joined by the Nether­lands, Lux­em­bourg and Fin­land, sought last week to limit the ECB’s planned su­per­vi­sory role to the largest banks, ac­cord­ing to a Nov. 6 doc­u­ment ob­tained by Bloomberg News.

The ap­proach con­trasts with EU Fi­nan­cial Ser­vices Com­mis­sioner Michel Barnier’s plans to put the ECB in charge of all euro-area banks. All 27 EU lead­ers last month af­firmed their pledge to es­tab­lish ECB over­sight of euro-area banks and set a Dec. 31 goal for po­lit­i­cal agree­ment on the su­per­vi­sor’s de­sign.

“The Ger­man gov­ern­ment sup­ports our po­si­tion and more im­por­tantly, we’re in­creas­ingly ex­pe­ri­enc­ing more sup­port from within the Euro­pean Par­lia­ment,” said Fahren­schon, a mem­ber of the Chris­tian So­cial Union, a coali­tion part­ner of Chan­cel­lor An­gela Merkel’s Chris­tian Democrats.

ECB Pres­i­dent Mario Draghi has called for im­proved su­per­vi­sion to help break the bank-sov­er­eign link that has pro­longed the fi­nan­cial cri­sis, open­ing the door for di­rect bank bailouts from the Euro­pean Sta­bil­ity Mech­a­nism if the coun­tries ac­cept con­di­tions. Draghi said last week that “fi­nan­cial union does not have to im­ply the pool­ing of de­posit­guar­an­tee schemes.”

Ger­man foot-drag­ging threat­ens to de­lay or scup­per the bank­ing union, said Si­mon Adam­son, an an­a­lyst with Cred­itSights in Lon­don.

“The op­po­si­tion by Ger­many and other nations puts the whole bank­ing union project at risk as the big roadmap agreed in June — bank­ing su­per­vi­sor, res­o­lu­tion fund and de­posit in­sur­ance — is clearly wa­tered down,” Adam­son said in an in­ter­view. “It is a typ­i­cal EU project, with high am­bi­tions in the be­gin­ning and many prob­lems with the im­ple­men­ta­tion.”

Fahren­schon’s po­si­tion dif­fers from those of lenders in Italy, Spain and France, which fa­vor a broader bank­ing union, as well as those of Deutsche Bank and Com­merzbank, Ger­many’s largest banks.

A bank­ing union is in ev­ery­one’s in­ter­est and Ger­many should be will­ing to make “con­ces­sions,” Deutsche Bank co- Chief Ex­ec­u­tive Of­fi­cer Juer­gen Fitschen said in a speech in Ham­burg on Nov. 8. Funds set aside to pay for res­cu­ing or wind­ing down Europe’s sys­tem­i­cally rel­e­vant banks in the event of a fail­ure should come from those banks them­selves.

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