GERMANY - Jochen Sanio, president of German financial regulator BaFin, is to lose authority as the government has approved a new leadership structure for the agency.
Under the new structure, approved by the federal cabinet late yesterday, the BaFin will no longer be steered by the BaFin president but by a five-member executive board. The board's decisions - and hence those of the BaFin - will be made by majority vote.
Members of the board will include BaFin's president, a vice president in charge of operations as well as the heads of banking, insurance and securities/asset management supervision.
But Otto Bernhardt, an MP from the governing Conservatives who is their financial expert, disputed the notion the government wanted to reduce the power of BaFin's president. "The aim is rather to strengthen the authority of those entrusted with banking, insurance and securities supervision," Bernhardt said.
The BaFin in Bonn declined to comment further on the new structure, stating "the finance ministry has responsibility for this issue".
The government's decision to change the way BaFin is run comes a year after Sanio almost lost his job over a report by PriceWaterhouseCoopers detailing internal corruption.
The PWC report revealed the former head of IT at BaFin had embezzled €4m via IT purchases and said at least five BaFin employees may have misused expense accounts and hired unqualified friends and relatives for jobs at the regulatory body.
According to the auditor, BaFin's leadership - namely Sanio and Karl-Burkhard Caspari, the BaFin vice president in charge of operations - knew about the corruption actions as early as 2004 but did not react.
This damning report prompted finance minister Peer Steinbrück to order Sanio and Caspari to Berlin to report before a committee made up of himself and other senior government officials.
While Sanio and Caspari were able to hang on to their jobs following a full report to the committee, Steinbrück decided to reform the way the BaFin is run.
The disgraced former head of IT at BaFin has since been convicted of embezzlement and sentenced to six years in prison.
BaFin was formed in 2002, after the government merged the regulators for banking, insurance and securities trading. German pension funds, including equity-oriented Pensionsfonds as well as insurance-type Pensionskassen and Direktversicherungen, are all part of its brief.