Banks in Germany Continue to Clash Over a Banking Union

“The effort to establish a euro-area banking regulator in Frankfurt is exposing deepening fault lines among the city’s banks as policy makers jostle over the shape of the industry.

Deutsche Bank’s co-Chief Executive Officer Juergen Fitschen, an advocate, is among top executives and officials meeting at the Euro Finance Week conference in the currency union’s financial capital today. At the center of the debate will be how much power the European Central Bank, based in Frankfurt, should be allowed to wield.

The argument pits Fitschen, who favors centralized ECB regulation, against more than 1,500 smaller banks who lend more cash to Europe’s biggest economy than he does. The discord over banking union mirrors a wider dispute between politicians, regulators and central banks across the continent that has led the Bundesbank, also based in Frankfurt, to lock horns with the ECB. At stake is a revival of last year’s bank share sell-off, prompted by foot-dragging on steps to stem Europe’s debt crisis.

“The path to banking union leads through Frankfurt and that’s where the conflicts will be focused,” Markus Rudolf, a professor of banking and finance at the WHU Otto Beisheim School of Management in Vallendar, Germany, said by phone. “Frankfurt is the site of very different competing opinions.” ”

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