Frankfurt The new head of the German financial regulator Bafin finds tough capital requirements important for big banks. Mark Branson said in April that thick capital buffers are of great importance because financial institutions can cope with high stresses from individual cases such as the collapsed hedge fund Archegos. “Going beyond international standards like in Switzerland has a lot of added value – precisely in these unpredictable cases.”
Branson did not sign the letter after consulting the Treasury Department, although he basically supported the demands of his colleagues, it is said in financial circles. It also played a role that his predecessor Felix Hufeld had agreed a corresponding line with the ministry. Branson did not want to question this appointment retrospectively, as it would have been bad style from his point of view.
Experts and politicians see the process as further evidence that the Bafin is too dependent on the Ministry of Finance, which is responsible for the legal and technical supervision of the authority.
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“Mark Branson started with a lot of praise. He now has to swim free, ”demanded FDP financial expert Frank Schäffler. “If, like his predecessor, he was hooked by the Ministry of Finance, that would be a bad start.” The Wirecard scandal had already shown that Bafin’s too much dependence on the Ministry of Finance would be harmful.
Branson receives an annual salary of 474,000 euros
The Bafin was heavily criticized for its dealings with the now insolvent payment service provider Wirecard. President Hufeld resigned early at the end of March. His successor, Branson, was previously head of the Swiss financial market regulator Finma and has been at the helm of Bafin since August.
According to financial circles, Branson, who has British and Swiss citizenship, receives an annual salary of 474,000 euros from the German financial supervisory authority. The “Bild” newspaper reported on this first. Compared to his previous job at Finma, where he earned 552,000 Swiss francs (around 508,000 euros), he has deteriorated slightly.
The Bafin and the Treasury did not want to comment on Branson’s salary, but acknowledged the Basel III capital rules, as they were decided four years ago. “In particular, the regulation on the so-called output floor should be implemented as agreed,” emphasized the Bafin. This limits the possibilities for banks to downgrade their risks and thus ultimately their capital requirements through the use of internal models.
“This last package of the global response to the last financial crisis is balanced and risk-based,” explained the Bafin. “Now, 13 years after the crisis, globally consistent implementation is long overdue.”
The Basel Committee on Banking Supervision, on which the world’s most important financial supervisors are represented, agreed on the set of rules at the end of 2017 after years of discussions. The EU Commission will probably present a proposal at the end of October on how the rules should be implemented in Europe.
Together with France, Luxembourg and Denmark, Germany has made proposals which, in the opinion of some banking supervisors and politicians, are not strict enough. The fact that France’s central bank governor François Villeroy de Galhau did not sign the open letter to the EU Commission like Branson was therefore attentive to the industry.
The Berlin Ministry of Finance declared that it was committed to “a complete and timely implementation of the Basel III standards at European level”. However, as communicated by the G20 finance ministers, the expectation was that the capital requirements for the banks would not increase significantly overall.
“We are sticking to that,” declared the ministry led by SPD chancellor candidate Olaf Scholz. “It is important for us to secure lending to the real economy and proportional regulation for small, non-international banks.”
More: Bundesbank contradicts banking lobby in dispute over stricter capital rules.