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Friday, January 04, 2013

Is Germany curbing the flow of capital across its borders?

Although it might seem rather dry, the news that the European Commission and the European Banking Authority "are concerned" that Germany's financial regulator, BaFin, could be restricting the free flow of capital to lenders abroad is potentially significant.

According to AFP, via Handelsblatt, the Commission and the EBA are looking into whether Germany's BaFin banking regulator is curbing the amount of money that can be transferred from bank subsidiaries in Germany to their foreign-based parent bank. Bafin reportedly wants to avoid a bank which falls under its oversight in Germany running into problems due to concerns about its parent company elsewhere.

Apparently it seems to be the Banca d'Italia that raised the issue within the EBA.

While this is all unverified as yet and the details are unclear, it would be a big deal if Germany was found to be placing restrictions on the movement of capital across the Single Market and to elsewhere in the eurozone. It also shows, yet again, how much resistance there will to a "full" EU Banking Union, in which one financial system underwrites another.


Rik said...

Has very little to do with restricting free movement of capital. It is about Southern banks in particular being de facto totally undercapitalised and often effectively bust.
So in the real world if (or when if you like) the German subsidiary would fall the Italian parent will never be able to properly recapitalise it. Similar like Icesave. With as annexed problem that via Target2 the bill likely ends up with the German taxpayer via the Bundesbank.

Problems of course:
-The rules are clearly not working (that eg Germany can rely on properly regulated and capitalized banks abroad). And
-Furthermore that you cannot state as a regulator that the Italian etc banks are probably bust.

Nice to see how this will play out. None of the parties will want the real discussion on the frontpage. Although from the European side it is not unlikely as we see now, that they will start something that cannot be reversed lateron.

Anonymous said...

The unelected failed politicians who make up the commission are only concerned with one thing and that is to keep the euro going, they are of course missing the point, as usual.

The euro is not a sensible currency, and is only a political ideation, for it to survive Germany needs to leave so that it can be devalued to the level it should be at, and the piigs nations can have a chance to recover.

Instead with typical eussr incompetence the unelected commission decides that Germany has to prop it up, and spend even more of their taxes on subsidising failing economies to the detriment of its own people.

We are all to well aware that the commission only thinks of itself, hence the well over inflation pay rises it gives itself, as well as very generous expense accounts, and massive pensions they receive, hence nothing gets altered to suit anyone, it is always lowest common denominator one size fits no one legislation that they produce.

The eu needs a new constitution, no commission, no president, what does rumpy do for his money anyway, no parliament, no stupid legislation, such as the arrest warrant the CAP the CFP, and freedom of movement, and just have trade agreements.

Ray said...

The shed at the bottom of the garden is falling apart, the windows are broken the door is hanging off and all sorts of creatures are munching on the contents. It is however still in the garden, so instead of keeping our valuables in the safe place of the main house, we should keep at least some of our precious resources in a biscuit tin in the shed. To who other than the idiots running the house would that sound like a good idea to ?