New Review

State Banks Bristle Under ECB Scrutiny

ECB Marc Steffen-Unger
The ECB is drawing the ire of regional German banks.
  • Why it matters

    Why it matters

    Publicly-owned banks are rebelling over efforts by the European Central Bank to exercise greater control over everything from their business plans to their dividends, which they say will create a single banking culture that is more susceptible to risk.

  • Facts

    Facts

    • The European Central Bank in November took over monitoring the largest 120 banks in Europe, including 20 in Germany.
    • Germany’s Landesbanken, a network of state-backed regional banks, have come under special scrutiny for their business models and the state support they receive.
    • Savings banks, state banks and lending societies have long implemented a cross-guarantee policy, but its future is in doubt as the banks quarrel over who should pay the most into a common fund.
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  • Audio

    Audio

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Gunter Dunkel, the chairman of Norddeutsche Landesbank Girozentrale, or NordLB, knows all about ships. His bank is one of the three largest financiers of ships in Germany.

The captains of giant ocean liners and the heads of banks have much in common these days, Mr. Dunkel said last week at Handelsblatt’s annual conference for savings banks and state banks in Berlin. The fortunes of both are increasingly being driven by forces outside their control.

In the case of banks, Mr. Dunkel was referring to the rigorous monitoring of financial institutions by the European Central Bank, which took over the job of regulating the largest banks in Europe in November 2014. Mr. Dunkel went on to use the maritime metaphor to launch a frontal assault on the new European financial watchdog.

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