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Cablegate: German Banking Regulatory Feud Resolved

VZCZCXRO1013
RR RUEHAG RUEHAST RUEHDA RUEHFL RUEHIK RUEHKW RUEHLA RUEHLN RUEHLZ
RUEHPOD RUEHROV RUEHSR RUEHVK RUEHYG
DE RUEHDF #0007 0371812
ZNR UUUUU ZZH
R 061812Z FEB 08
FM AMCONSUL DUSSELDORF
TO RUEHC/SECSTATE WASHDC 0113
INFO RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHZL/EUROPEAN POLITICAL COLLECTIVE
RUCNFRG/FRG COLLECTIVE
RUEHDF/AMCONSUL DUSSELDORF 0129

UNCLAS DUSSELDORF 000007

SIPDIS

SIPDIS

E.O. 12958: N/A
TAGS: EFIN ECON PREL PGOV GM
SUBJECT: GERMAN BANKING REGULATORY FEUD RESOLVED


Sensitive but Unclassified -- Not for Internet Distribution

1. (U) On February 5, the two chief German banking regulatory
bodies ended a long-standing feud over who will have ultimate
oversight in the German banking sector. In a much anticipated
decision, the Bundesbank in Frankfurt ceded most regulatory
authority (banking supervision, sanctions, etc) to Bonn-based
BaFin (Federal Financial Supervisory Authority). The Bundesbank
will retain responsibility for the continuous monitoring of
banking activities by evaluating auditors' reports, annual
financial statements as well as the risk management and capital
reserves of banks. It will provide information to BaFin so that
the latter can carry out its watchdog duties, such as issuing or
revoking banking licenses, removal of bank managers, or imposing
of moratoria.

2. (U) Initial reports indicate that Finance Minister
Steinbrueck strongly urged Bundesbank and BaFin to come to an
agreement on their own or face the prospect that he make the
decision for them. The Finance Ministry publicly expressed
satisfaction with the solution as it reduces redundancy,
increases transparency, and demonstrates that banking oversight
in Germany is "strong and decisive."

Comment
----------

3. (SBU) This decision appears to resolve a number of unclear
aspects in the division of labor in regulatory oversight of the
German banking sector. A possible resolution has been months in
the making and while BaFin officials told us (most recently in
January) that BaFin would be pleased with any resolution that
resulted in better transparency, it appears that BaFin won the
turf battle.

4. (U) This message was coordinated with Embassy Berlin and CG
Frankfurt.

BOYSE

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