CHANCELLOR ANGELA Merkel’s Christian Democrats (CDU) have pledged to unite German banking regulation under the roof of the Bundesbank if they win September’s general election.

Their model for a new German finance regulator? Ireland.

At the moment, the Bundesbank divides responsibility for financial sector oversight with the banking regulator, BaFin.

This division of labour has no shortage of critics, but previous reform plans until now ran into the sand because of resistance in the institutions involved.

What’s novel about the CDU plan is not the idea itself, but the source of inspiration. Ireland’s reputation in Germany in all things financial has taken a battering since the near-collapse of two Dublin-based German banks, Sachsen LB and Depfa Plc.

A senior BaFin official, when asked recently by The Irish Times about the Irish financial regulator, replied: “What financial regulator? Ireland’s a regulation-free zone.”

But CDU officials preparing the party election programme, to be presented next Monday in Berlin, say they are sure Ireland’s regulator is the best fit for Germany.

“Not all ideas that come out of Ireland are bad,” said Dr Anne Deter, a member of the CDU parliamentary finance group.

“It’s a very nice country and we find exemplary the idea of a unified supervisor as a holding under the roof of the central bank without touching the bank’s independence.”

BaFin chief Jochen Sanio is concerned about the changes afoot for his institution. But he has admitted in a recent interview that the financial crisis “has shown in a dramatic way the dangerous holes in our regulation system”.

Bundesbank president Axel Weber opposes the plan energetically.

In a statement, the Frankfurt-based bank said it would “not accept any suggestions that would curb its independence”.

The Social Democrat finance minister Peer Steinbrück has accused the CDU of doing just that, “putting the independence of the Bundesbank on the line”.

The CDU rejects the claim. They say the Irish model, as recommended by external experts, would see BaFin remain under finance ministry control, even if it became part of the Bundesbank. A holding model similar to that of the Irish regulator with the Irish Central Bank would protect the Bundesbank’s independence.

“Lots has gone wrong with our regulation and we are drawing the consequences of the financial crisis,” said Dr Deter of the CDU.