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German push for Liikanen consensus could help Deutsche Bank
January 16, 2013 / 8:17 PM / 5 years ago

German push for Liikanen consensus could help Deutsche Bank

BERLIN, Jan 16 (Reuters) - Germany said it is seeking a common position with the French government over how to apply new EU bank safety rules, a move that could allow Deutsche Bank to sidestep a division of its business.

An EU advisory group came up with the idea last October of a legal separation between commercial and investment banking operations in an attempt to shield taxpayers from having to fund further bailouts and to protect savers from any more banking collapses.

But a French proposal put forward in December stopped short of forcing a legal separation, allowing lenders to maintain combined commercial and investment banking operations.

On Wednesday the German finance ministry said: “We are in contact with the French government about the current French proposal, and are working on a way to advance the implementation of the Liikanen proposals on a national and European level.”

Finnish central banker Erkki Liikanen headed the EU advisory group.

Finding a pan-European consensus that the French agree with makes it less likely that Deutsche Bank will be forced to legally split its traditional deposit-taking business from most market-making and trading activities.

Germany’s BdB bank lobbying association said on Wednesday that full legal separation amounts to overregulation and could damage the German economy. Deutsche Bank co-chief executive Juergen Fitschen is set to lead the association from April 15.

In September last year, Deutsche Bank announced a strategy based on closer integration between its corporate and investment bank and its asset and wealth management unit.

Liikanen’s group, which included Deutsche Bank’s former chief risk officer Hugo Baenziger, said ring-fencing investment banking would make it easier for the part of the bank that holds savers’ deposits and lends to businesses to keep running even if other arms of the group collapsed.

The French proposal asks banks to house their proprietary trading units in separate, self-funded entities - leaving most of French lenders’ investment banking activities untouched, handing a victory to BNP Paribas, Societe Generale and other banks, after months of intense lobbying.

In another step towards tighter banking regulation, Germany wants to be able to force banks to be wound down or restructured and to restrict their legal rights if ordered to take steps to ensure they are not too big to fail, according to a working draft law seen by Reuters on Thursday. (Reporting By Matthias Sobolewski, Klaus Lauer in Berlin; writing by Edward Taylor; Editing by Ruth Pitchford)

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