15 October 2012

DW interview with Gerhard Hofmann: 'Banking reform politically motivated'

More supervision, more capital and the possibility of splitting up risky investments - that's how the EU banking sector is meant to be stabilised. But the German bank representative Gerhard Hofmann is sceptical of the plans.

Gerhard Hofmann is a board member of the National Association of German Cooperative Banks (BVR). He currently represents the German credit service sector.

DW: Mr Hofmann, the so-called Liikanen proposals were recently introduced in Brussels. The plans aim at splitting risky investment banking from traditional consumer banking. The German credit service sector is sceptical: Why?

Gerhard Hofmann: There's no flat-out refusal, but different critical objections: The key question concerns the outsourcing of trade activities as proposed by the Liikanen group, whether it really minimises risks in the financial system as a whole. Everyone agrees that the "too big too fail" issue - that a bank is too big to drop out of the market - needs to be solved. But it's not clear if the Liikanen proposals are helpful in this regard. We need to examine all proposals, of course, but the Liikanen plan is largely politically motivated.

DW: There are proposals in the US and Great Britain for a dual banking system. But the German banking industry argues that it will clash with the German banking system. Why?

Gerhard Hofmann: There's a long and very successful tradition of the universal bank principle in Germany. In the aftermath of the Second World War, this principle held over the course of several centuries - even politically - and was regarded as very beneficial in ensuring financial service supply for business and private customers. The spread of risks was also regarded as positive. It's important to note that the financial crisis and sovereign debt crisis had nothing to do with the dual banking system - or the universal banking system.

DW: The EU summit in mid-October will also deal with the issue of banking supervision, which is to take effct as of 2013 - in just three months. At this point, is it feasible for supervison to begin by then?

Many European countries want the work to start by this proposed date, especially because of the already mentioned connection between ESM and banking supervision. Then Spanish banks could be recapitalised through ESM funds. Germany is looking for high quality European banking supervision. But the pressure on the German government to implement the supervision as fast as possible will be quite high. In my opinion we need a lot more time, but from a political point of view, this may not be possible.

Full interview

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