Bundesbank battle

German Central Bank Fights Demotion

Source Handelsblatt
Pushed into a corner: Jens Weidmann.
  • Why it matters

    Why it matters

    The Bundesbank, one of the most venerable institutions in Germany, may soon lose one of its few remaining powers – monitoring German banks – to the European Central Bank.

  • Facts


    • In November, the ECB is due to take over responsibility for Europe’s largest banks, including 21 German institutions.
    • Many ECB policies, especially on inflation, have been based on successful Bundesbank formulas.
    • As part of the shake-up, the Bundesbank will also lose powers to the German Federal Financial Supervisory Authority (BaFin).
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Andreas Dombret is traveling to Berlin on a difficult mission. The German central bank’s board member in charge of financial supervision is fighting a threat to the venerable institution’s power – a threat that boils down to just a few words on a piece of paper.

Today at 3 p.m., Mr. Dombret will take a seat in a federal committee room and hope to convince the finance committee of the Bundestag, Germany’s lower legislative branch, to change a proposed law regarding European banking regulation.

There is much riding on the few words Mr. Dombret wants to change. The central bank, based in Frankfurt, is in danger of losing much of its authority over monitoring banks in Germany – one of its few remaining responsibilities as monetary policy in the 18-nation euro zone is now set by the European Central Bank.

So it’s no surprise that Germany’s central bank and its president, Jens Weidmann, are exerting pressure. The seven-page position paper it prepared for the finance committee, obtained by Handelsblatt, reads like a formal warning. The law would “severely weaken the role of the German central bank,” it stated.

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