September 23, 2020

New Concerns From Germany Over European Banking Supervisor

DUBLIN — Germany has raised new concerns about a proposal to create a single banking supervisor for the European Union that could delay plans to help troubled lenders that finance ministers were to discuss here on Friday.

Last December, after weeks of bitter wrangling, euro zone finance ministers agreed to put about 150 large banks under the direct supervision of the European Central Bank and to give it powers to intervene to oversee smaller lenders.

The policy is meant to break the vicious circle between indebted sovereign governments and shaky banks. The creation of the single supervisor also is a precondition for nations to tap the Union’s bailout fund, the European Stability Mechanism, to recapitalize struggling lenders directly.

But in recent days, German diplomats made clear at E.U. headquarters in Brussels that they had some reservations about giving the central bank such powers, partly because of the fear that it might alter decisions on monetary policy to make supervision easier.

Wolfgang Schäuble, the German finance minister, was expected to present those concerns at the gathering Friday, according to officials from Ireland, which is hosting the meeting in its role as holder of the E.U.’s rotating presidency

Mr. Schäuble was expected to ask for more scope for national parliaments to hold the E.C.B. accountable, and to ask for an eventual change in the E.U. treaties to ensure that the central bank’s supervisory and monetary roles are clearly separated, according to the officials, who spoke on condition of anonymity as is customary ahead of such meetings.

Ireland and Spain are among the nations lobbying strongly to speed the direct aid, because pumping bailout money to banks avoids putting the loans on national balance sheets and helps keep a lid on borrowing costs.

Irish officials said late Thursday that the German demands could probably be accommodated, and that governments could still reach a final agreement on the single supervisor in coming days.

But German concerns still could hold-up that approval if other governments regard the concerns as little more than a delaying tactic.

Analysts said the German demands were a sign that Berlin did not want to be seen opening the way for further financial commitments, like bailing out banks in weaker parts of the euro area, before national elections in September.

“This instrument will never see the light of day in a German election year, ” said Mujtaba Rahman, Europe director at Eurasia Group, referring to the plans for the direct aid to banks. “Agreement on the E.C.B. supervisor will certainly be a precondition for its use.”

Euro zone finance ministers were meeting here to discuss the situation, as well as aid for Cyprus, Ireland and Portugal, on Friday, before finance ministers from the rest of the Union arrive later for meetings ending Saturday.

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