REFILE-UPDATE 2-German regulator: 'no euro zone bank watchdog until 2014'

(Repeats to fix fault with formatting of text)

* German regulator BaFin sceptical about deadline

* BaFin says does not understand roadmap to ECB bankregulation

* Bank of France, Bank of Spain, Bank of Italy decline tocomment

FRANKFURT, Oct 9 (Reuters) - Plans to establish a euro zonebank regulator by Jan. 1, 2013, may be delayed by a year,Germany's markets regulator said on Tuesday, a potential setbackto efforts to help distressed euro zone countries and theirbanks.

European leaders agreed at the end of June to set up asingle supervisor to oversee 6,000 banks in Europe, but ElkeKoenig, head of Germany's markets regulator BaFin, said theoriginal deadline to start such supervision was unrealistic.

"I could imagine that we get there in January 2014. That's aguess," she told German television station ARD on Tuesday,adding this was her personal view.

Koenig argued that efforts to centralise supervision shouldproceed with caution, a view at odds with several euro zonepolicymakers, but in line with German Finance Minister WolfgangSchaeuble, who last month objected to giving the ECB sweepingpowers.

The speedy establishment of common banking supervision isnecessary to pave the way for the direct recapitalisation oflenders via the European Stability Mechanism (ESM), a euro zonebailout fund which came into force on Monday.

Propping up weak banks is seen as a way to break the viciouscircle linking indebted governments and their troubled lenders.Doubts over the solidity of Spain's finances, for example, areinextricably linked to its weak banking sector.

The Dutch Central Bank said on Tuesday that policymakersshould quickly give the European Central Bank the tools tosupervise major lenders and to enable the ESM to directlyrecapitalise troubled banks if shareholders or nationalgovernments proved unable.

Germany, the euro zone's economic heavyweight, hascriticised efforts to allow the ECB to supervise all euro zonelenders, claiming the ECB will be overstretched.

In reality, the ECB will not be in day-to-day charge ofsupervision, which will still lie with national and localregulators. But the ECB is expected to leave nationalsupervisors with less wiggle room to adopt special rulesdesigned to protect their home market.

Germany's landesbanken, for example, are currently allowedto keep using a special form of non-voting capital as a way tomeet tougher rules on capital safeguards.

The ECB's president Mario Draghi commented on the timetablefor creating a new supervisor on Tuesday.

"The ECB is not supposed to take over supervision in threemonths' time and do it. There is a phase-in time. We foreseethat one year will be needed to adapt all the structures,"Draghi told the European parliament.

As a first step, the ECB is set to take responsibility forsupervising banks which have received state aid beginning 2013.From mid-2013 the ECB will add systemically relevantinstitutions, before finally overseeing all euro zone banks by2014.

Upon being asked whether a January deadline for Euro zonebank supervision was realistic, The Bank of France, the Bank ofSpain and the Bank of Italy declined to comment.

Gerard Rameix, head of the French markets watchdog AMF, saidhe had heard nothing to suggest there would be a change to thetimeframe. "I think they are playing on words a bit. If they aretalking about the utmost end of the process, then they are maybenot wrong," Rameix said.

Late on Monday Koenig said that although she supported theidea of common supervision in principle, she hasn't understoodhow the transition from national to pan-European supervisionwill work in practice.

"I support the idea of a strong European regulator. But Ihave not seen a roadmap of how we get there," she said.

"The last thing we can afford is to have an interregnumbetween those who are no longer responsible (for supervision)and those who are not yet in a position to act," Koenig said.

Earlier this month ECB policymaker Joerg Asmussen warnedthat tapping the ESM for direct bank recapitalisation will onlybe possible once supervision has been set up.

And last month, Germany, the Netherlands and Finlandinsisted that the ESM should not be used to solve "legacyissues", essentially saying that highly indebted banks in Spain,Ireland and Greece will remain the responsibility of thosecountries' governments.

The Basel Committee on Banking Supervision said last weekthe EU was failing to apply the Basel III capital requirementrules for banks because it softened up a definition of whatqualifies as core capital.

Basel III says it must be common equity capital whileGermany has pushed hard to include what some regulators see asless proven financial instruments which are widely used in theGerman public sector banking arm of Landesbanks.

(Reporting by Kerstin Doerr in Berlin; Edward Taylor inFrankfurt; Jean-Baptiste Vey and Lionel Laurent in Paris; JesusAguado Gonzalez in Spain, Stephen Jewkes in Italy.; Editing byGreg Mahlich and Louise Heavens)

((edward.taylor@thomsonreuters.com)(+49 - 69 - 7565 1187))