Financial Supervision

New Boss, New Problems

hufeld_HB
Felix Hufeld has his work cut out.
  • Why it matters

    Why it matters

    BaFin is losing influence and Felix Hufeld, a fan of regulation, may wish to tighten its control through new financial rules.

  • Facts

    Facts

    • BaFin is a federal authority charged with supervising the financial sector in Germany.
    • It has been shedding powers to European institutions as part of the E.U.’s planned monetary union.
    • Felix Hufeld replaces Elke König, who is moving to a new E.U. banking supervision agency.
  • Audio

    Audio

  • Pdf

It was a pretty fast rise: After only two years working at BaFin, the German financial markets watchdog, Felix Hufeld this week takes over its top job.

He succeeds Elke König, who left the agency to head up the E.U.’s new Single Resolution Board, set up in the wake of the 2008 financial crisis to supervise and, if needs be, winding down failing E.U. banks to prevent costly bailouts.

This new body and other European institutions has changed the role of  financial supervision in Germany. BaFin now has to fight hard to remain relevant.

“Effective supervision in an international context” is Mr. Hufeld’s goal. Increased cooperation with international supervisors such as the European Central Bank will be unavoidable in the future.

“Mr. Hufeld has given us a tough time.”

Jörg Schneider, Head of finance, Munich Re

BaFin had recently given over some of its responsibilities to the ECB’s single supervisory mechanism and EIOPA, the E.U.’s supervision authority for the insurance sector.

German Finance Minister Wolfgang Schäuble is keeping a close eye on Mr. Hufeld. He was impressed by the one-time lawyer’s quick ascent, and would like to see more Germans fill positions in the international world of finance, as Ms. König has gone on to do.

The prospect of Mr. Hufeld climbing even higher will annoy leading financial lobbyists in Germany such as the head of the German insurance association, Alexander Erdland, and the joint-boss of Deutsche Bank, Jürgen Fitschen

Mr. Hufeld is known as a friend of regulation. As head of BaFin’s insurance watchdog, he forced insurers to build up additional capital so that they could service their obligations despite the continuously low interest rates in the market. “He’s given us a tough time,” said Jörg Schneider, head of finance at reinsurer Munich Re.

Mr. Hufeld did a masters degree at Harvard and worked at Boston Consulting Group, which means he has excellent English and has been shaped by Anglo-Saxon ideas. At the same time, his roots are in Germany.

A lawyer by trade, Mr. Hufeld has worked for both banks and insurers, as head of corporate development at Dresdner Bank and Germany chief of U.S. insurance broker Marsh.

Critics might have found one fault though: “He’s not really familiar with the technical side of the insurance business,” said a source. Mr. Hufeld tends to rely on specialists for help in this area.

In his new role as lead supervisor of the financial and banking sector, Mr. Hufeld plans to focus on prevention rather than cure. His aim is to try to discuss problems with companies before they hit a crisis: a change in strategy for the authority which has so far tended to act only after a problem arises.

He already has experience in modernizing agencies. In his role as head of insurance at BaFin, he formed teams to monitor entire companies rather than having them specializing in different areas.

One of the main topics of his tenure will most likely be integrating the Federal Agency for Financial Market Stabilization. Mr. Schäuble plans to first expand the institution’s personnel and then to incorporate it into BaFin.

 

This article originally appeared in the business magazine WirtschaftsWoche. To contact the authors: mark.fehr@wiwo.de; matthias.kamp@wiwo.de; christian.ramthun@wiwo.de

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!