FRANKFURT AM MAIN: Germany's constitutional court on Tuesday ruled that the European Union's so-called banking union with shared supervision and liquidation structures for major lenders was in line with national and EU law.
“The European Union… has not overstepped the powers granted to it in the treaties in a strict interpretation," judges at the Federal Constitutional Court in Karlsruhe found, according to a press release.
Plaintiffs — including a co-founder of far-right party Alternative for Germany (AfD), Bernd Lucke — had filed a constitutional complaint, claiming that there was no legal basis for the banking union in the European treaties.
In 2013, Germany and other eurozone countries handed oversight of more than 100 “significant" banks in the single currency area to the ECB, in a new arm known as the Single Supervisory Mechanism (SSM).
The judges found the set-up preserves an important role for national supervisory authorities.
Meanwhile, a separate organisation, the Single Resolution Board (SRB), was set up to handle winding up bankrupt lenders.
While there are “questions" about the mechanism, “there is no obvious overstepping of competences, as long as the bounds of the tasks and powers granted to the board are strictly respected," the judges said.
The banking union was designed in the wake of the financial crisis and ensuing eurozone sovereign debt crisis, aiming to prevent states being forced to bail out the critically-important sector under threat of economic collapse.
So far, European leaders have not been able to agree on the third “pillar" of the banking union, a European Deposit Insurance Scheme (EDIS) aimed at discouraging bank runs.
The Constitutional Court will also on Tuesday and Wednesday examine another key element of EU crisis fighting, the European Central Bank's 2.6 trillion euro ($2.9 trillion) mass bond-buying scheme that ran from 2015 to 2018.
European judges have already given the all-clear to the so-called “quantitative easing" (QE) programme in an opinion requested by the German court.