Banking regulation row escalates

German finance minister Wolfgang Schaeuble pushed back against Deutsche Bank co-CEO Juergen Fitschen after he said the minister’s call to keep up vigilance of banks was “irresponsible”.

Mr Schaeuble — speaking to reporters in Berlin — challenged comments made on Wednesday by Mr Fitschen in his capacity as president of the BDB private banking federation, saying that he was “wrong”.

“The experience of the financial crisis shows that the regulation of financial markets is urgently needed,” he said. “The fact that we have to keep regulating is self-evident in view of highly innovative forces.

“That’s why I think if Mr Fitschen looks over his statement carefully once again he will surely come to the conclusion that he’s factually wrong and that his tone of voice was inappropriate.”

The conflict between Germany’s biggest bank and Chancellor Angela Merkel’s point man broke out after Mr Schaeuble said in a Handelsblatt newspaper interview that “banks still show great creativity in evading regulation”.

It became public as Mr Schaeuble prepares to host talks in Berlin today on bank failure rules with EU financial services chief Michel Barnier.

Mr Schaeuble should “keep a sense of proportion,” and “it’s irresponsible to comment in such a populist manner,” said Mr Fitschen at a banking event in Berlin on Wednesday. “One can’t stand up and say the banks are still circumventing the rules.”

Mr Fitschen spoke on the same day the European Commission fined six companies a record €1.7bn for rigging benchmark interest rates between 2005 and 2010. While Deutsche Bank’s €725m penalty was the biggest, Mr Fitschen said “today’s headlines are almost exclusively about things that happened many years ago”.

“That doesn’t mean they are any less worthy of criticism, but it isn’t OK to assume from that that things haven’t changed since 2008 or 2009,” he said.

Mr Schaeuble reprised some of the comments he made to the newspaper saying he told the Deutsche Bank co-head recently that the financial industry, not governments, caused Europe’s debt crisis.

Lawmakers from Ms Merkel’s Christian Democratic Union and the Social Democratic Party backed Mr Schaeuble in the spat.

Klaus-Peter Flosbach, the parliamentary finance spokesman in parliament for the two-party bloc that backs Ms Merkel, said that it’s “incomprehensible” for Mr Fitschen to reprimand Mr Schaeuble just as his bank was fined. Ms Merkel’s bloc “won’t allow any letup in regulation,” Mr Flosbach said.