The interview was conducted by Jan Mallien and Jan Schrader.

Mr Nagel, just over a year ago in Davos, you spoke in favour of a European deposit insurance scheme. You later said that your remarks had caused a “s***storm” ... 

There were certainly strong headwinds. In any case, the topic of a European deposit insurance scheme is now on the agenda. This is important to me, because it is ultimately about increasing Europe’s resilience. 

You are advocating a European solution, although Germany-based systems already exist.

What I have in mind is a hybrid model that would complement national deposit insurance schemes at the European level. This European component could then provide support once national resources have been depleted. The national deposit insurance schemes would thus be first in line, as they are now. This kind of system would also take factors unique to Germany into account. 

This system would entail new costs and risks for the German banking industry.

Contributions could be calculated on the basis of banks’ levels of risk. Our aim is, of course, to reduce risks in the banking system as a whole. Any existing deposit insurance schemes or institutional protection schemes would be viewed in a positive light.

Savings banks and credit cooperatives are strongly against the idea. How do you intend to bring them around?

The banking union is a European project. For Germany, whenever major steps have been taken towards European integration, they have had a positive effect: take the Treaty of Rome or the introduction of the euro, for example. A complete banking union and capital markets union could mobilise a great deal of capital and make Europe more attractive to international capital markets. The resilience of the banking sector would be strengthened and financial stability reinforced, too. The German banking industry would also benefit from this. 

Deposit guarantee schemes have been a subject of debate in Europe for over a decade now. How much longer will this continue?

I have great hopes of Europe starting to act on this issue during the current legislative period – preferably in the first half.

By the end of 2026, in other words?

Precisely.

Central banks have been cautioning against Bitcoin and other crypto-assets for years. Yet the cooperative banks, for instance, want to offer crypto trading services, and even the savings banks are considering doing the same. Are their warnings falling on deaf ears?

I would welcome a more critical examination of the topic. As I see it, the enthusiasm for unbacked crypto-assets such as Bitcoin can be compared to the tulip mania of the 17th century. Back then, tulip prices boomed spectacularly in the Netherlands, rising tenfold within the space of a few weeks. Then the tulip bubble burst, triggering the first financial crisis in modern history. Hype always dies down at some point. Crypto-assets such as Bitcoin are digital tulips.       

The FDP has floated the idea of using Bitcoin as a reserve asset. 

This worries me, because it gives the impression that an asset is being given a kind of government seal of approval. Reserve assets must be secure, liquid and transparent. Bitcoin is none of these things. 

The power of the crypto sector is rising; indeed, it was one of the largest donors during the US elections. Is there a danger that the trend will be impossible to stop?

We in Europe have taken precautions by adopting the Markets in Crypto-Assets (MiCA) Regulation. This creates greater security by setting clear requirements for issuers of stablecoins, for example, with regard to reserves used as backing. However, I think it’s important to point out what it means to purchase highly speculative crypto-assets. Let no-one say I didn’t advise caution. 

Speaking of regulations: many expect President Trump to relax the rules for US banks. However, some are also saying that they are currently subject to stricter rules than in Europe. What is your take on that?

This is not true across the board. In the United States, capital requirements are somewhat stricter for very large banks under the first pillar of Basel III. However, looking at the individual requirements under the second pillar already paints a different picture: European banks are subject to stricter requirements.

What if the United States does not implement the stricter capital requirements for banks under Basel III? 

I expect Basel III to be finalised on both sides of the Atlantic. It is important that we in Europe speak with one voice, and not just when it comes to banking issues. 

The ECB Governing Council unanimously took the decision to cut interest rates by 0.25 percentage point in December. A cut of 0.5 percentage point was also up for discussion. Are such large steps only possible in extreme situations?

The 0.25 percentage point interest rate cut was appropriate, as evidenced by December’s inflation figures for Germany, which were again somewhat higher than expected by the market. But I see nothing wrong with discussing a cut of more than 0.5 percentage point. That’s natural.

Has the ECB been too cautious with its interest rate cuts thus far?

I think a cautious approach is appropriate in view of the high level of uncertainty. Inflation is still elevated at present. Services prices, in particular, are seeing continued dynamic growth. We should therefore not rush the process of monetary policy normalisation.

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