Bafin Opposed EFSF Bank Capital Injection Draft EBA Letter

German financial regulator Bafin opposes a proposal by the European Banking Authority to give the European Financial Stability Facility the power to directly inject capital into banks.

Bafin’s representative on the EBA board of supervisors voted against a draft letter to the council of European finance and economy ministers containing the proposal, the German regulator’s spokesman Ben Fischer said in an interview today.

“Bafin is of the opinion that under the EU’s legal regime, it’s not the task of EBA to handle these kinds of questions,” said Fischer.

The majority of the 27 EBA members approved the plan, the Financial Times Deutschland reported earlier today, citing an unidentified person close to the German government. Under its current setup, EFSF can only grant funds to governments.

“The EBA is not calling for an urgent and massive recapitalization of EU banks,” the EBA said in an e-mailed statement. The watchdog is “closely monitoring the risks for EU banks and submitting to EU institutions its views on possible policy options.”

The EFSF should only lend to states and not to banks, said Michael Meister, the senior finance and economy spokesman for German Chancellor Angela Merkel’s Christian Democrats.

“I see no need to introduce new legal relationships with the private sector,” Meister told reporters in Berlin today. “I would make a plea that we stick to extending guarantees for states.”

Banks should turn to the governments of the countries in which they have their headquarters, Meister said.

To contact the reporter on this story: Karin Matussek in Berlin at kmatussek@bloomberg.net Rainer Buergin in Berlin at rbuergin1@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@Bloomberg.net.

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