German Bank Associations Concerned Over Roles of ECB, Bank Supervisor, ESM
06/29/2012| 11:20am US/Eastern
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By Ulrike Dauer
Germany's four influential banking associations Friday acknowledged that European leaders at a two-day summit made progress in agreeing on measures toward stabilizing the euro zone, but expressed strong concern about a number of proposals that are still being worked out.
Concerns centered around the European Central Bank's role in a joint European banking supervisor, the joint supervisor's area of influence and the future role of Europe's planned permanent bailout fund, the European Stability Mechanism.
The strongest resistance for getting the ECB involved in banking oversight came from the VOEB association that represents state-controlled Landesbanken, which said the new European banking supervisor shouldn't be housed with the ECB, as banking supervision "isn't compatible with the ECB's mandate and would undermine its independence that's crucial for ensuring price stability."
"Therefore, the ECB should be left out of such plans," the VOEB said.
The BdB, which represents commercial banks like Deutsche Bank AG (DB) and Commerzbank AG (>> Commerzbank AG), emphasized that--if the ECB were to be involved in banking supervision--its independence should be ensured, so that there won't be the slightest impression that public-sector financing and oversight could get muddled. The savings banks association DSGV had a similar concern.
In Germany, the Deutsche Bundesbank and the BaFin financial services regulator share banking supervision.
European leaders said at their Brussels summit they would speed up plans to create a single supervisor to oversee euro-zone banks and agreed that euro-zone bailout funds should be able to directly recapitalize struggling banks. They also will push forward on a road map for achieving "genuine monetary union," likely including "grand bargain" steps toward mutual bond issuance in return for a watertight regime of fiscal discipline and tighter integration of the region's banking systems.
The single supervisor ought to be up and running prior to any bank getting direct aid from the ESM, the BdB demanded.
It also should get oversight over U.K. banks, it said.
"Financial crises don't stop at the British Channel," the BdB said.
Banks receiving ESM aid should be controlled by the single supervisor, the VOEB also said. However, the supervisor should be restricted to overseeing big banks with cross-border business in Europe, the savings banks demanded. Direct ESM aid must be the exception and tied to tough sanctions for winding down or downsizing the banks, they said.
"Banks must be enabled to fail," the savings banks said.
Several banking associations and fund managers called upon EU leaders to set a clear timetable for achieving "a true fiscal union" in order to reinstate trust in the euro area's single currency.
-Friedrich Geiger contributed to this report.
Write to Ulrike Dauer at ulrike.dauer@dowjones.com
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