German lenders urge resistance to faster build-up of bank resolution fund

German lenders are lobbying finance minister Wolfgang Schaeuble to resist calls for faster pooling of Europe’s planned bank-resolution fund, citing the cost for Germany.

Sticking with the fund’s proposed 10-year buildup while merging its national compartments after five years would make it easier to unload lenders’ accumulated bad assets at Germany’s expense, the five main German bank lobbies said in a letter to Schaeuble dated February 5. They also rejected an ECB- backed proposal to cut the build-up to five years.

Speeding up joint responsibility under the fund “would give participating member states the opportunity to move legacy burdens that originated under national responsibility to the European level at an early stage”, the bank lobbies said. “A pooling of fiscal liability for these legacy burdens should urgently be excluded.”

As governments and the European Parliament try to break a deadlock on legislation, Schaeuble and the German banks agree the fund’s mutualisation can’t run ahead of the build-up to its full €55bn strength.

“If we all agree that there should be bail-in rules, we should please not make rules that in the end only consist of passing the bill from taxpayers in one country to the taxpayers in other countries,” Schaeuble said on Tuesday. “This is not a solution because the German taxpayer is also a taxpayer.”

German banks will contribute about a quarter to the fund and taking on legacy burdens in other EU states would cost them the most, including possible extraordinary contributions if the fund ran dry, the banking lobbies said.

The letter was signed by the heads of the BVR lobby of co-operative banks; the DSGV savings banks’ lobby; the VDP lobby of Pfandbrief banks, the VOeB lobby of public banks and the BDB lobby of commercial banks.

— Bloomberg