Bloomberg News

Ackermann Says Higher Capital Won’t Master Sovereign Crisis

October 13, 2011

(Updates with comments on state aid in fourth paragraph. See EXT4 for more on the euro-area financial crisis.)

Oct. 13 (Bloomberg) -- Deutsche Bank AG Chief Executive Officer Josef Ackermann said he doubts forcing European lenders to boost their capital levels will master the sovereign debt crisis.

“The injection of capital would not address the actual problem,” Ackermann said, according to the copy of a speech given at a conference in Berlin today. “It is not the capital funding of banks that is the problem, but rather the fact that government bonds have lost their status as risk-free assets.”

European Commission President Jose Barroso yesterday called for a coordinated recapitalization of the region’s lenders, with government funds if necessary, as part of a wider rescue package. An Oct. 23 summit of euro leaders looms as a deadline for a breakthrough in combating the crisis, which has driven Greece toward default, rattled world markets and dented confidence in the survival of the 17-nation currency.

Deutsche Bank, Germany’s largest bank, will “do everything” not to take money from the state as part of assistance efforts for European banks, Ackermann said today. Avoiding government aid may affect the company’s business, he said. The German lender navigated the financial crisis in 2008 without a government capital injection.

Deutsche Bank fell 34 cents, or 1.1 percent, to 28.95 euros by 10:44 a.m. in Frankfurt trading, its first decline this week. The shares are down 26 percent this year, compared with a 28 percent decline in the 50-company Stoxx 600 Banks Index.

‘Haircut’ More Probable

The Deutsche Bank CEO, who last month said that conditions in the stock and bond markets are reminiscent of the environment after the collapse of Lehman Brothers Holdings Inc. in September 2008, reiterated that the region’s banks have boosted capital levels and reduced their dependence on short-term funding. He called the debate about recapitalizing banks counterproductive.

“On the one hand, it signalizes that a debt haircut is considered to be more probable,” Ackermann said. “On the other, since private investors will certainly not be providing the funds for such a recapitalization, governments would ultimately have to raise such funds themselves, thus only exacerbating their debt situation further.”

To make Greece’s debt burden manageable, European leaders are debating whether to push bondholders to accept losses on the country’s sovereign debt that go beyond the roughly 21 percent agreed on in July. Ackermann, who is chairman of the Institute of International Finance, a Washington-based banking group, played a role in the negotiations for private-sector involvement.

Deutsche Bank on Oct. 4 scrapped its profit forecast and announced 500 job cuts and further writedowns of Greek bond holdings amid a “significant and unabated slowdown in client activity” amid Europe’s debt crisis.

--Editors: Frank Connelly, Stephen Taylor

To contact the reporter on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net; Oliver Suess in Munich at Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net

To contact the editors responsible for this story: Frank Connelly at fconnelly@bloomberg.net; Edward Evans at eevans3@bloomberg.net


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