German coalition agrees Bundesbank to take over bank supervision

October 9, 2009

By Matthias Sobolewski
BERLIN, Oct 8 (Reuters) – Chancellor Angela Merkel’s conservatives and their Free Democrat allies have agreed the basics of an overhaul of Germany’s banking supervision framework, participants in coalition talks said on Thursday.

Under the agreement, reached by a working group that is thrashing out the financial policies the partners aim to pursue in a coalition government, German supervision would be concentrated at the national central bank, the Bundesbank.

“We have agreed that banking supervision will be concentrated at the Bundesbank,” Hermann Otto Solms, an FDP finance expert who is a potential finance minister in the next government, told reporters.

Currently, responsibilities are shared between the Bundesbank and the Bafin supervisory body but the Free Democrats want the central bank to take over full responsibility.

A decision on whether the Bundesbank’s role would also include supervision of the insurance sector has been postponed for now, participants in the talks said.

This is a scenario the central bank has proposed but which the insurance industry opposes.

Whether to proceed down this path would be left to the new government once it forms, the participants said. The issue would not be resolved in a formal coalition agreement, they added.

The conservatives and FDP, who won enough votes in Germany’s Sept. 27 election to form a coalition, are holding talks to set a policy blueprint with which to govern for the next four years.

(Additional reporting by Gernot Heller, writing by Paul Carrel; Editing by Andy Bruce))

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