Deutsche Bank’s Banziger Says Crisis ‘Far From Over’

by Michael Smith

Deutsche Bank AG Chief Risk Officer Hugo Banziger said in March 2009 that the global credit crisis is “far from over” and global financial regulations must be overhauled to regain investor trust.

“We are in the middle of it,” Banziger, said recently at an event at the Frankfurt School of Finance and Management. The industry has “an opportunity” to build a stable financial system that seeks higher capital buffers, and encourage investors to return money to the market and help stem the crisis, he said.

Deutsche Bank in February reported its first annual deficit in more than 50 years after the worst financial crisis since the Great Depression pummeled bond and stock trading. The crisis has caused $1.3 trillion in losses for financial companies worldwide, a total that may climb to more than $3 trillion, Banziger said today, citing forecasts.

The German bank skirted the worst of the U.S. subprime mortgage collapse by betting against the bonds that contributed to credit losses and writedowns at the world’s largest financial companies and forced government-led bailouts from Berlin to London to Washington.

Deutsche Bank is resisting pressure to take government aid or raise additional capital to protect existing shareholders that have seen the value of their stock decline, Banziger said today.

“One of my top priorities is to make sure that those who lost money recover it,” Banziger said. Protecting shareholder value is “our deep philosophy” and Deutsche Bank’s management “will stand by this.”

Deutsche Bank has several times raised its goal for its Tier 1 capital ratio, a key measure of solvency, Banziger said. The bank’s ratio is 10 percent, which may be insufficient in the future and result in raising the standard rising to 12 percent, he said.

When someone like this gentleman say that we are in the middle of the crisis, aka recession/depression, then we all better take heed, and that includes the politicians. While may be lawyers or have been to law school this does not make them economists and such like and it would appear that their adviser only tell them what they wish to hear or what they advisers think they want to hear rather than the truth and that all the while this truth is self-evident, at least to the ordinary man and woman.

We are up a creek without a paddle and the governments are trying to tell us that the canoe we are in has an outboard engine that just needs the spark plug cleaned.

The British Chancellor of the Exchequer – the Finance Minister, in other words – Alistair Darling, just had to admit, in so many words, that the first quarter of 2009 is as bad as was the last quarter of 2008. Now what does that make this now. Still not recession/depression?

I think it is irrelevant what the markers are that makes something a recession or depression; we call, I am sure, can see where we are headed and how and also what got us there.

None of the stimulus packages will get us out of the problem. Only a change of behavior, in commerce and banking will change things.

The world, especially here the developed countries whose banks got us into this mess, must change the rules or, let me rephrase that, bring back the old banking rules. The ones that did not permit banks to overstretch themselves as they have done. The one that made it obligation to lend no more than 80 per cent of deposit base, period, for high street banks. Merchant banks are a different kettle of fish.

The problem is and was that all the high street banks thought that they had to be merchant banks and such; greed was what ruled, and that is what got us into this mess that we are in now in the same way as it got the world into the mess of the Great Depression.

Family banks in America, for instance, and the small Farmer's banks and such, are all doing well, it would seem. Now why might that be? Because they follow that old golden rule. Shame the rest was guided by greed only and not by common sense.

How do we get out of it? By going back to the old values, back to the future. The same way we must and should go in many other aspects.

© M Smith (Veshengro), 2009