German court clarifies co-determination laws amid banking merger tensions

The German Federal Court of Justice (Bundesgerichtshof) has clarified the application of the Co-determination Act (Drittelbeteiligungsgesetz). In two fundamental rulings, the court determined that the threshold of 500 employees for supervisory board co-determination is based solely on the personnel of the individual stock corporation or European Company (SE), rather than the entire group structure. This prevents the inclusion of employees from joint operations within a corporate group when calculating the threshold.

In the banking sector, discussions are intensifying regarding the potential takeover of Commerzbank by UniCredit. The European Commission has criticized national governments for hindering cross-border bank mergers, specifically referencing efforts to protect domestic institutions.

Simultaneously, banking supervisors from Germany and Austria are advocating for a specialized regulatory regime for small banks. This proposal aims to reduce the disproportionate administrative burden on smaller institutions by replacing complex risk-weighted capital requirements with a higher leverage ratio, modeled after systems in Switzerland, the UK, and the US.