German Banker Gains Support for Narrower Banking Union - by Annette Weisbach

Georg Fahrenschon, who led Germany’s savings banks in helping quash a proposal for Europe-wide deposit guarantees, is now seeking to limit the remaining aspects of a European banking union: a joint resolution fund and central supervision of all the region’s lenders. 

“I’m hard put to find anyone who speaks in favor of common European deposit insurance these days,” Fahrenschon said in an interview in Frankfurt on Nov. 9. He stepped down as Bavarian Finance Minister last November and became president of the German savings banks association, or DSGV. “It’s a commonly held misconception that banking supervision, banking resolution and deposit insurance all has to be structured centrally via Europe.”

Germany’s 423 savings banks and 11 landesbanks provide 43 percent of the loans to the small- and mid-sized companies, known as Mittelstand, that power the country’s export-driven economy. The lenders oppose a joint liability plan because they say it would put German depositors at risk over bank rescues in countries like Spain, where a real-estate collapse forced the government to seek a European Union bailout for its banking system.

“Our mandate is against that,” said Fahrenschon, 44. “The savings banks have a mandate to operate regionally by taking deposits and lending regionally.”

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