ECB's Weidmann - bank union risks conflict of interests

FRANKFURT Mon Nov 19, 2012 4:32am EST

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FRANKFURT Nov 19 (Reuters) - A European banking union risks a conflict of interests between banking supervision and monetary policy and these two areas must be separated, European Central Bank policymaker Jens Weidmann said on Monday.

Weidmann, chief of Germany's Bundesbank, has resisted a push to broaden the ECB's remit by putting it in charge of banking supervision in Europe - a move he says risks compromising the ECB's main goal of price stability.

In a speech at Euro Finance Week in Frankfurt, the Bundesbank chief also pushed for Germany to have a strong voice in supervision voting in a European banking union.

"As such decisions could also lead to fiscal costs, it would only be consistent to have voting weights based on capital shares," Weidmann said in the text of a speech for delivery at the conference.

Germany's Bundesbank has the largest share of the capital base at the ECB, which policymakers envisage taking on the role of European banking supervisor.

"The banking union should relieve common monetary policy - but there is a conflict of interests between banking supervision and monetary policy in the practical implementation," Weidmann said.

"Both areas must therefore be strictly separated," he added. "This separation is doable, but difficult - difficult from an organisational viewpoint and difficult from a legal viewpoint."

(Writing by Paul Carrel)

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