ECONOMY

Protectionism hurts European banking market, European Central Bank executive member warns

WARSAW – Governments that try to block cross-border banking mergers undermine the European Union’s goal of creating a single financial services market, European Central Bank Governing Council member Axel Weber said. Weber, who is also head of Germany’s Bundesbank, said EU governments have an obligation to shed nationalist policies such as the Polish government deployed when it tried to curb foreign dominance in its banking sector. «Being part of the EU means being part of the common market for financial services and this should exclude any national considerations for the financial markets,» Weber said in a joint interview with Reuters and German and Polish newspapers. Earlier this year Poland’s ruling conservatives tried, unsuccessfully, to block the Polish leg of a pan-European takeover of Germany’s HVB Bank by Italy’s Unicredito already cleared by Brussels. They argued the merger would lead to too much concentration in the Polish market. When the central bank’s financial watchdog refused to bow to pressure and help scupper the deal, the conservatives launched a probe into 17 years of bank privatizations and supervision, saying the central bank had allowed foreign institutions to win too much control over the sector. Weber said taking such a narrow national view not only ran counter to EU laws but also was counterproductive, preventing the EU from fully exploiting its economic potential. «Any protectionist tendencies are in total violation of the idea of a common competitive market for EU banking services,» he said in remarks cleared for publication yesterday. «Embarking on this road would ultimately work in the direction of impeding growth by not allowing domestic consumers and investors to reap the full benefits of a large and deep financial area.» Weber, in Warsaw for meetings with fellow central bankers and due to deliver a speech on central bank independence at a bank seminar, said legal guarantees of independence and lack of political interference were prerequisites for effective monetary policy and low inflation. «Central bank independence is not an aim in itself. Rather it is important for the credibility of the central bank and it is a key requirement for a successful stability-oriented monetary policy,» he said. He said it was also one of the legal requirements for eurozone membership, but stressed legal safeguards were not enough. «This independence also has to be lived. Politicians have to respect the central bank’s independence, they should not attempt to influence those that are in charge of monetary policy decisions.» Poland’s central bank has complained that the bank probe, since declared illegal by the country’s constitutional court because of its too broad mandate, served to exert pressure on the independent central bank. Weber also reiterated the ECB line that achieving broad economic convergence with the euro area was more important than how fast euro candidates fulfilled entry criteria. »What counts is that each new euro area member country ultimately contributes to the stability-oriented monetary union. «The fulfillment of the accession criteria is key; if it takes time the countries should allow this time.»