July 27, 2014 / 11:12 AM / 3 years ago

UPDATE 1-Complaint made to top German court against banking union - paper

(Adds response from finance ministry)

BERLIN, July 27 (Reuters) - A group of professors has lodged a complaint with Germany’s Constitutional Court against Europe’s planned banking union, which starts work in November, Welt am Sonntag newspaper reported on Sunday.

The union is Europe’s main confidence-building response to the financial sector crisis. Under the plans, the European Central Bank will take over as banking watchdog and will have the means to shut lenders it decides are too weak to survive.

“The banking union has no legal basis in European treaties and so represents a breach of the Basic Law,” Berlin lawyer Markus Kerber, a professor in public financial and economic policy, was quoted as saying in the paper.

He added the rules represented a first step towards new liabilities for German taxpayers for banks outside national bank supervision.

“A European banking union could have only been introduced with a change to the EU treaties,” Kerber said in the Welt am Sonntag.

A spokeswoman for the finance ministry declined to comment directly as no legal complaint had been received.

“The finance ministry has carefully checked the current foundations of the banking union with the department responsible for constitutional questions. We view the banking union as constitutional,” she said in a statement.

No-one was available at the Constitutional Court to comment on the report.

Germany’s cabinet passed a package of draft laws on the banking union earlier this month.

Once in place, the European plans will mean there is one supervisor for euro zone banks, one set of rules to close or restructure troubled banks and one pot of money to pay for everything.

To minimise the expense to euro zone taxpayers, EU policymakers have drawn up rules under which shareholders, creditors and very large depositors will lose money first in the event of a bank failure.

The Constitutional Court, based in the south-western city of Karlsruhe, has a history of delaying, but not blocking, EU treaties to test their compatibility with German law. Its judges have several times imposed the condition that Germany’s parliament has to be fully consulted.

Earlier this year the Court upheld the legality of the euro zone bailout fund. (Reporting by Madeline Chambers; Editing by Toby Chopra)

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