Back in October 2009, German chancellor Angela Merkel needed only three weeks of negotiations between her conservative bloc and the Free Democrats to sign her second coalition agreement. High on the priority list were tax-cuts for business and making the Bundesbank the lead bank supervisor.
As it turned out, her finance minister Wolfgang Schäuble, after much haggling over reforms to national bank supervision, gave up in utter frustration. The Bundesbank would not accept the role of lead banking supervisor, arguing that this would imply a certain control by the German government and undermine its independence in monetary policy. As a result, Germany’s federal financial supervisory authority, Bafin, wound up with more responsibilities and far more staff.
