Vorabentscheidungsverfahren

“Advance decision process.”

For the first time ever, Germany’s supreme court, the Bundesverfassungsgericht in Karlsruhe, sent a case on to the European Union’s supreme court, the European Court of Justice in Luxembourg. It was for a “decision in advance” on a lawsuit brought in Germany by members of the C.S.U. and Leftists political parties together with other groups, about whether the policy of the European Central Bank announced by Mario Draghi (Goldman Sachs) of buying theoretically unlimited amounts of debt from Member States would be exceeding the Bank’s current brief by redistributing money to countries that hadn’t cleaned up their governments yet. It’s also feared if left unlimited the policy might put the E.C.B. in the hazardous position of becoming a “bad bank” on behalf of the banks in the troubled countries whose debt it was buying.

Süddeutsche.de reported that this sort of debt purchasing, which a government must promise to cut costs and carry out structural reforms in order to receive, has never occurred, but the announcement that it was possible calmed the markets in 2012. Spiegel.de made it sound more like the structural reforms and cost cutting were linked to aid from the Euro-Rettungsschirm, the “euro rescue umbrella” bailout programs, but repeated that the E.C.B. has never carried out any of these so-called Outright Monetary Transactions.

After the Bundesverfassungsgericht receives the decision of the European Court of Justice on these questions, said the Spiegel.de article, it will then decide its own case. And here are four ways the Bundesverfassungsgericht said in its 52-page submission that the European Court of Justice might deal with the Bundesverfassungsgericht’s concerns:

  • “The bond purchases should not undermine the policies of the bailout funds [Rettungsschirme] which link loans to clear conditions such as savings programs and reform programs.”
  • “The E.C.B. would have to rule out the possibility of a debt haircut [Schuldenschnitt] for the purchased bonds, because in the end a haircut would mean financing of the country.”
  • “Individual Member States’ bonds may not be bought in unlimited amounts.”
  • “The E.C.B. should influence so-called pricing [Preisbildung] as little as possible by buying bonds shortly after their emission by the States.” Apparently the E.C.B. previously agreed to limit O.M.T.’s in this way to some degree by agreeing to not buy bonds immediately after emission and to follow purchasing time frames that will be defined in a guideline that will not be made public.

(Fore OB ent SHY doongs fair FAR en.)

Nach versteckten Risiken prüfen

Investigating/testing/auditing for hidden risks.

Update on 05 Dec 2013: Scheduled to take over responsibility for Europe’s largest banks at the end of 2014, the European Central Bank started its latest “stress test” on the risk management being exercised by the 128 largest European banks. This included 24 German ones, of which ARD tagesschau.de listed the following: Deutsche Bank, Commerzbank, some Landesbanks, DZ Bank, Hamburg Sparkasse and the Wüstenrot & Württembergische (not a bank but a “financial company”; many pies). Structures and solutions for the stress test were not yet entirely defined. National finance ministers were meeting to decide who would be responsible for banks found to have too many hidden risks: Italy wanted Europe to be on the hook for bailing them out, for example, and Germany wanted the national governments to be responsible first. The stress test was expected to last nearly one year.

(NOCHH   fair SHTECKED en   REE zee ken   prüü fen.)

Sich ein genaueres Bild machen

“To make yourself a more detailed/precise picture.” When German politicians are photographed flying over a flood or hurricane looking out the airplane window, they are “making themselves a picture” of the phenomenon.

In a more positive-sounding example, the troika put together from the E.U. Commission, European Central Bank and International Monetary Fund that audits the austerity measures of financially strapped member states’ governments before allowing them to borrow more money is now being audited itself by the E.U. Parliament. Particularly the M.E.P.’s from countries subject to the troika are examining their work in detail, with criticism and questions and reporting back to their home newspapers.

(ZICHH   eye n   geh n OW! air ess    BILLED   mochh en.)

Inserito scidulam quaeso ut faciundam cognoscas rationem

“Please insert your ATM card and enter your PIN,” as it appears in Vatican City. From the book Found in Translation by Nataly Kelly and Jost Zetzsche.

There have been concerns about the Vatican Bank (the “Institute for Works of Religion,” IOR) and money laundering, to the extent that the European Central Bank even blocked Vatican Bank ATM and credit card terminals at one point, practically excluding Vatican City from the EU. In response to pressure from the Roman district attorney’s office, the Bank of Italy, Italy’s central bank, froze electronic transfers with EU banks for the IOR, which initially instead of cooperating tried to find a new banking partner in Switzerland. Now, the Vatican’s government has created a financial oversight authority which presented its first report on 22 May 2013, the first time in history such a thing has happened. The head of the authority announced that six suspicious cases had been reported to them. After investigating, they forwarded two of these cases to Vatican district attornies.

Update on 02 Oct 2013: A group of cardinals is meeting in Rome to discuss Vatican reforms that include issues at the Vatican bank. The I.O.R. published its financial data for the first time on 01 Oct 2013.

An 07 Oct 2013 Spiegel.de article said in Summer 2013 the Vatican Bank had ~1000 accounts held by people not actually eligible to have a Vatican bank account, containing ~300 million euros.

Update on 04 Dec 2013: Former U.S. ambassador to the Vatican Mary Ann Glindon is chairing a “papal committee” that will submit reform suggestions, but Pope Franziskus has already tasked his personal secretary Alfred Xuereb with overseeing the following reforms, said Spiegel.de:

  • “Thousands of accounts were closed. Only people in the global Catholic association [globaler Katholikenverbund] will be allowed to be I.O.R. customers in future.
  • “No more anonymous numbered accounts, long a house specialty.
  • “The bank will issue no loans, or if it does they will only be in a few ‘extraordinary cases.’
  • “Speculative or risky investments have been forbidden for customers’ money.

“These reforms have been described in detail in a manual for employees, as well as how to handle cash transactions; the I.O.R. averaged about triple the percentage of cash transactions as worldly banks.”

Gemeinsame Bankenaufsicht

Common bank supervisory authority. At this week’s summit to define a road map for structural economic reforms of the European Union, EU heads of state did agree on how to make the ECB a supervisory authority for European banks. Goals included ensuring similar bank monitoring quality across Europe and enabling more rapid identification of national banks that are starting to slide into trouble. Starting in 2014, the ECB will monitor only banks that are particularly large (balance sheet >30 billion euros or >20% of their country’s economic output but in any case each country’s three largest banks) and/or internationally active; currently this would cover the ~150 most important banks in Europe and ~30 banks in Germany. In justified cases, the ECB will be able to audit additional bank types, such as banks that have received financial assistance, and after the first indications of financial crisis the ECB should be able to intervene with all banks. The new authority will be mandatory for Eurozone members, with voluntary participation for other members.

Germany had objected that giving the ECB authority over all European banks (~6000) would leave German taxpayers on the hook for banks in other countries. France had wanted to give the ECB authority over all European banks in order, they said, to get the new system up and running more rapidly. As it is, more French banks than German banks will be subjected to the new ECB monitoring (President Hollande said 95% of French banks and 82% of German banks will probably be covered by the new authority). The new system is intended to cut links between national banks and sovereign debt, capping the tendency for some governments to issue too much debt and for their national banks to buy too much of it. They’re still discussing how to avoid conflicts between the ECB’s monitoring and financial policy roles. To separate the two functions within the same institution, it has now been agreed that a board will be created that does not include people involved with the financial policy side. When the ECB’s governing council, the highest financial policy board at the ECB, disagrees with the ECB’s bank monitoring decisions, an “arbitration mechanism” will be applied. Experts say much remains to be clarified.

The European Stability Mechanism (ESM) should be up and running in 2013. It will be able to send capital directly to troubled banks, with the prerequisite that it first unanimously asks the ECB to take over running them, and the ECB agrees to do so.

Update on 12 Sep 2013: The E.U. parliament approved the creation of a central Bankenaufsicht, being variously translated as a central bank oversight, a banking union, a single bank supervisor or single supervisory mechanism, that is intended to increase the world’s economic stability by being separate from national governments and national bank associations. It is to be at the European Central Bank but to be kept strictly separate there from other E.C.B. business, somehow, and now planned to be up and running by Fall 2014.

Update on 15 Oct 2013: The E.U., in the form of the Member States’ finance ministers, agreed on the basic structure of the Bankenaufsicht, to be indeed located at the European Central Bank. It will have oversight over ~130 large European banks. Startup is scheduled for ~November 2014. Tagesschau.de added that the Bankenaufsicht is the first of three planned “pillars” of the E.U.’s banking union [Bankenunion]. The other two pillars, “a mechanism for winding down rotten banks [marode Banken] and a uniform deposit insurance [Einlagenversicherung],” have still to be defined.

A stress test is scheduled next month for Europe’s 130 largest banks, because people remain concerned that some large banks might have managed to keep some risk mismanagement hidden in their books, even at this late date. Only after banks have passed the upcoming stress test, however strict it turns out to be, will they be allowed into the protection or at least under the umbrella of the new Bankenaufsicht.

Tagesschau.de’s Rolf-Dieter Krause commented about the upcoming E.U. stress test, “After rather doubtful exercises of this type in the past, this time they say they are *really* going to test the banks.”

(Geh MINE zom eh   BONK en ow! ff zicked.)

Blog at WordPress.com.