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Bundesbank's Lautenschlaeger:Banking Union Needs Legal Basis:Report

FRANKFURT -(Dow Jones)- A banking union in the euro zone can only be established after a legal basis is put in place, Deutsche Bundesbank Deputy President Sabine Lautenschlaeger tells the Frankfurter Allgemeine Zeitung in an interview published Saturday.

"This can only happen at the end of a long road," she is quoted as saying.

"While supervisory law is extensively harmonized, Europe lacks a system of administrative law--absolutely essential to any agency that is supposed to be capable of direct action," she says.

This week, European Central Bank President Mario Draghi urged Europe's political leaders to establish a banking union to protect depositors and prevent failed banks from threatening the financial system.

"The creation of [a European Union]-wide deposit insurance and EU rescue fund could bring about the mutualization of risk," she says.

Lautenschlaeger says such a model could only be successful if "as in a fiscal union, central control and enforcement rights were established," she adds.

The wide-ranging and time-consuming changes in EU treaties and national constitutions mean this suggestion isn't a practical solution to problems faced now, she says.

German banks have minimal exposure to Greece's financial woes, she adds, but declines to speculate on a Greek exit from the euro zone.

"The immediate consequences of a possible euro-zone exit by Greece wouldn't deal a blow to the German banking system," Lautenschlaeger says.

-Frankfurt Bureau, Dow Jones Newswires; 49-69-29725-500

(END) Dow Jones Newswires

June 02, 2012 07:18 ET (11:18 GMT)

Copyright (c) 2012 Dow Jones & Company, Inc.



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