In Frankfurt, the European Central Bank has a complex, often antagonistic relationship to the banking peers of its host country, who for most of the post-war period called the fiscal shots in Europe’s largest economy.
But with the ECB’s rise as the fiscal heavyweight in the 19-country euro zone, German financial regulators and Bundesbank policymakers are increasingly chafing at ECB methods and philosophy that are not as conservative as they would like.
The latest point of contention is over whether the ECB or Germany’s federal financial market regulators are the supreme authorities with responsibility to oversee commercial banks in Europe’s largest economy, Handelsblatt has learned.
The ECB last year took over responsibility for supervising 120 of the largest banks in the euro currency bloc – a step that many hailed as the biggest move towards European integration since the introduction of the euro currency.
Since last November, the ECB has directed a teams of banking supervisors who go into commercial banks, open up and inspect their books. National regulators — which used to dictate the terms of supervision — are now merely on hand to cooperate with ECB supervisors, and no longer take the lead.
That newfound power never did sit well with bankers in Europe’s largest economy, where many of the thousands of smaller banks across the country in particular fought tooth and nail to remain supervised by German regulators rather than the new pan-European teams. It was a battle the Germans won to a large extent – just 20 banks in Germany are now directly supervised by the ECB, though the ECB does have the right to intervene in the regulation of smaller banks if it sees a crisis in the making.
Now Germany is trying to further roll back some of the ECB’s power. The German Finance Ministry wants to give the country’s own banking regulator, the German Federal Financial Supervisory Authority, or BaFin, the power to issue its own regulations on how banks manage risks and what areas of the bank can be outsourced.