(Updates with Ackermann comments on liquidity rules in eleventh paragraph. See EXT4 <GO> for more on the European debt crisis and GMEET <GO> for more on the IMF meetings.)
Sept. 25 (Bloomberg) -- Deutsche Bank AG Chief Executive Officer Josef Ackermann said it was “crucially important” for euro-area governments to implement a July 21 agreement to beef up the rescue fund for their common currency.
Ackermann, speaking as chairman of the Institute of International Finance at the group’s annual meeting in Washington today, called upon euro-area governments to quickly approve the 440 billion-euro ($593 billion) European Financial Stability Facility and measures to enhance greater economic policies discipline, according to an e-mailed statement from the IIF, a global association of financial institutions.
“The euro is an essential and stable pillar of the international monetary system and has brought stability and growth to its members,” Ackermann said. “Its central role in the global monetary system makes it all the more important that any doubt about the workability of its institutional foundations be removed.”
European policy makers face mounting pressure from foreign counterparts and investors to prevent their sovereign debt crisis from further roiling world markets. U.S. Treasury Secretary Timothy F. Geithner set the tone for yesterday’s annual meeting of the International Monetary Fund in Washington by warning that failure to combat the Greek-led turmoil threatened “cascading default, bank runs and catastrophic risk.” Billionaire investor George Soros said “something needs to be done” to safeguard Europe’s banks because Greece may be unable to avoid default.
German lawmakers are scheduled to vote on approval of their country’s share in the fund later this week. European members of the Group of 20 agreed Sept. 22 to “maximize” the fund’s impact, while there are also discussions under way for speeding the start of a permanent rescue program.
The G-20 summit in November in Cannes must make “strong and concrete” decisions to restore confidence in the prospects for economic recovery and financial stability and must ensure that measures taken are consistent across the G-20, said Ackermann.
The IIF is confident that the commitments made by the financial industry as part of the Greece rescue efforts will yield strong participation in the debt exchange offer, Ackermann said. He said it wasn’t “feasible” to reopen the agreement and the parties involved should focus on its “timely and resolute” implementation.
Private participation will save Greece 54 billion euros in interest alone, the IIF said. Combined with official support and if Greece attains its fiscal and growth targets, the aid would reduce Greece’s net debt as a ratio to gross domestic product from 155 percent in 2011 to 98 percent by 2020, the IIF said.
The IIF said yesterday that Ackermann will step down as its chairman in June 2012 and be replaced by HSBC Holdings Plc Chairman Douglas Flint.
Ackermann also addressed financial regulation, saying uneven application of capital rules from the Basel Committee on Banking Supervision in different countries might lead to “massive distortions.” Some measures go beyond the Basel III requirements, accelerate the proposed timetable, and create an unlevel international playing field, he said.
Lenders across the globe are retrenching “to an unprecedented extent” and shun risks, partly because of an overburden of regulation and uncertainly about future rules, including liquidity requirements, Ackermann said.
The “deleveraging” contributed to lower credit volume extended to businesses and households in the EU and the U.S., undermining the economic recovery, said Ackermann. An IIF study shows that the combined impact of all regulatory reforms could see GDP in the mature economies over 3 percent lower by 2015, which implies foregoing the creation of around 7.5 million jobs, he said.
Contributing to that effect are proposed Basel capital surcharges on banks that are judged to be too big to fail, which policymakers need to review, said Ackermann.
“The proposals might not only add to moral hazard and increase risk, but right now the critical concern is that they can be particularly damaging given the fragility of financial markets and the serious concerns about the economic outlook,” Ackermann said.
He also criticized a financial transaction tax that is being considered in some regions, including the European Union, calling the idea a “costly mistake” that would burden consumers and weaken lenders.
--Editors: James Kraus, Anthony Aarons
To contact the reporter on this story: Karin Matussek in Berlin at firstname.lastname@example.org
To contact the editor responsible for this story: Anthony Aarons at aaarons@Bloomberg.net.