20 January 2014

Schäuble says treaty change 'indispensable'

At a Deutsche Börse AG event, Finance Minister Wolfgang Schäuble warned the German finance industry that further regulation was planned, and said that Germany's bank split law could serve as a model for Europe.

Partially translated from the German

Treaty change

As reported by Handelsblatt and Reuters, Wolfgang Schäuble, Germany’s Finance Minister, said that, "in the long run [EU] treaty change is indispensable", although he admitted that he could not wait for treaty change in moving ahead with the eurozone Banking Union. Speaking at the Deutsche Börse’s Annual Reception in Frankfurt, Schäuble reiterated that in order to "create a strong Europe" it was necessary to "adjust the EU treaties to the current realities". He added that "whoever believes this is difficult is right… [but] this has to be made up for as soon as possible".

Further financial regulation

He warned Germany's financial centre that further regulatory steps would be necessary to ensure the permanent stability of the financial sector and to prevent speculative bubbles on financial markets. "For this purpose, we must take a lead in regulatory measures", he said.

After friction between him and the co-head of Deutsche Bank, Jürgen Fitschen, last year, Schäuble was conciliatory and invited the banks and other players in the financial industry to take part in a constructive dialogue on new rules. He asked them not to put all their energy and competence into trying to fight new regulation. In return, policy-makers and regulators would seek a sense of proportion and greater practicability of new regulations.

Bank split law

Bloomberg  reports further on Schäuble's opinion that Germany’s plan to split banks and thus separate some of their riskiest businesses from deposits to protect clients, could serve as a model for Europe. Starting in 2017, German banks must supply capital and funding for proprietary and high-frequency trading operations as well as some business with hedge funds. The law stops short of ordering banks to split off trading on behalf of clients, as suggested by a panel led by Bank of Finland Governor Erkki Liikanen which advised the European Commission on its proposals.

The Commission set a provisional date of 29 January to publish a draft law on bank structure, Chantal Hughes, a spokeswoman for Michel Barnier, the EU’s financial services chief, wrote in an email to Bloomberg News. "I assume that, as with our German bank split law, the European rule won’t threaten the financing of the real economy through the proven universal banking model", Schäuble said.