Power Struggle

Bafin Loses Clout

Draghi and Jens Weidmann Reuters
Mario Draghi gets his way. Seen here (l) with Jens Weidmann, president of the German Bundesbank.
  • Why it matters

    Why it matters

    • The controversy illustrates challenges the European Union and member states face in deciding who’s in charge.
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  • Facts

    Facts

    • Criticism is centered on Germany’s proposed “liquidation mechanism” law.
    • The law originally proposed that directives issued by Bafin, concerning minimum requirements for risk management, be replaced by more binding statutory regulation.
    • Lawmakers on the finance committee proposed changes that were approved on Wednesday.
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    Audio

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Germany’s governing coalition has backed down in its fight with the European Central Bank over monitoring banks – and the Federal Financial Supervisory Authority, known by its German acronym Bafin, is suffering as a result.

The core issue was the proposed legislation by the European Commission to put in place new regulations to wind down credit institutions in Germany.

The goal of this legislation is simple: Banks should never – due to their huge size – be able to force states to rescue them with taxpayer money. It should be possible to liquidate them without endangering overall financial stability.

But ECB officials got heated up in a hearing on Germany’s so-called “liquidation mechanism” law. Central bank officials argued it was just one more example of the European Union’s hodgepodge of regulations that vary between the 28 member nations.

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