Commission warned not to weaken local banking authorities

FRANKFURT – European Commission plans to limit bank supervisors’ powers to block cross-border mergers must not go too far, Bundesbank board member Edgar Meister told Reuters on Friday. Meister, who is responsible for banking supervision at the German central bank, said he backed the Commission’s aims of more integration and making the approval process more transparent, but said planned reforms were not the way to achieve the goals. «Of course national regulators should eliminate political hindrances to cross-border mergers,» he said in an interview. «But individual cases of misuse must not lead to the situation where regulations overshoot the mark, in that the rules for all supervisors are changed in an unreasonable way, even though in most countries there have not been any problems.» The Commission is working on a proposal from Internal Market Commissioner Charlie McCreevy to amend the EU’s banking directive, making it more difficult for national supervisors to block foreign takeover bids on prudential or suitability grounds. The shake-up plans, expected to be finalized in September, would slap tight deadlines on the approval process for mergers and takeovers and set out a checklist of criteria to be considered. They follow a scandal last year over claims that then Bank of Italy governor Antonio Fazio favored an Italian bidder in a takeover battle for domestic lender Antonveneta over Dutch bank ABN AMRO. The row ended in his resignation. Meister, who also heads the European Central Bank’s Banking Supervision Committee, said watering down bank supervision was not the way to encourage cross-border mergers, which are infrequent in the banking sector compared with other industries. «The Commission’s approach of putting pressure on bank regulators is not appropriate and not the right way to go about achieving its goals,» he said. «If you really want more European integration, you should not stop supervisors from doing their job properly.» Cutting the deadline for regulators to oppose a merger from three months to 30 working days, for deals within Europe, did not give enough leeway to consider complicated cases. «There is a potential danger that the supervisor would be too restrained by the shorter time frame and that a comprehensive examination of the prospective purchaser would not always be possible,» he said. Asked if it was possible that mergers could be approved that would then pose a risk to financial stability, Meister said it could not be ruled out. He also raised concerns with the proposed checklist of examination criteria, saying it was too restrictive, and said the Commission should not be allowed right of access to merger documents.