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Why Deutsche Bank’s Dr. Josef Ackermann thinks action needed to restore bank confidence?

By Amarendra Bhushan for CEOWORLD Magazine Updated:October 13, 2008

A top European banker, the world’s leading bank lobby said on Sunday he was confident European leaders would come up with a plan to help banks roiled by the financial crisis. I think we have to do whatever is needed to bring confidence back, even if it is a little artificial with some state help and guarantees.

‘I am confident that important countries in Europe are prepared to offer adequate rescue packages for banks,’ said Josef Ackermann, Deutsche Bank AG CEO and chairman of the Institute of International Finance, an international banking group.

Prime ministers and presidents from the 15 countries sharing the euro currency plus Britain met in Paris on Sunday to find a response to the chaos that has frozen credit markets, the lifeblood of the financial system, and sent markets crashing. Ackermann, who spoke as chairman of the financial industry group Institute of International Finance, said that some banks will need to get capital from governments in order to exit the “downward spiral” occurring in the markets.

He made the comments on the sidelines of an IIF press conference in which the organization called for international accounting reforms and an international regulatory coordination group. At the conference, Ackermann said that he believes that the allowing Lehman Brothers Holdings Inc. (LEHMQ) to collapse was a mistake, but it was “politically understandable” amid discussions of the moral hazard posed by rescuing the firm.

But markets would take some time to digest announcements made this weekend, Ackermann told reporters. “This can only be an interim solution because it has to get to bring back confidence to get back to normal interbank lending,” he said.

He said that banks’ lack of confidence in each other as borrowers, combined with the continuing spiral caused by mark-to-market losses, has contributed to the worsening situation. The loss of confidence in the credit markets is so great that it won’t go away overnight, but he said that the next 24 hours “are very critical moments” for action to be taken.

Ackermann said he is against the temporary halting of trading in stock markets to put the measures in place, calling it a “mousetrap solution.” He said that injecting “artificial” confidence into the markets with government help is much better than shutting out investors in a days-long trading halt.

Though action is needed, Ackermann believes that the efforts need to be coordinated in order to avoid the transfer of capital to more advantageous markets that may be offering stronger government guarantees. “If each one now offers more protection than the other one, you have regulatory arbitrage,” he said.

He said such actions, such as the interbank loan guarantees instituted in the United Kingdom and United Arab Emirates, jeopardize “the level playing field” of all financial markets. ‘I am sure that markets will remain very volatile next week,’ he said.

Dr. Josef Ackermann bio (Profile)
Chairman of the Management Board , Management Board member since 1996

Dr. Josef Ackermann is Chairman of the Management Board and the Group Executive Committee of Deutsche Bank. In this function, he is responsible for Corporate and Investment Bank, Private Clients and Asset Management, Corporate Investments, Regional Management as well as Communications & Corporate Social Responsibility, Corporate Development and Economics.

He studied Economics and Social Sciences at the University of
St. Gallen, and in 1977 – after obtaining his doctorate – joined Schweizerische Kreditanstalt (SKA). In 1990, Ackermann was appointed to the Executive Board of SKA, becoming its President in 1993.

In 1996, Ackermann joined the Board of Managing Directors of Deutsche Bank, where he was responsible for the investment banking division. Under his leadership, this business unit developed into one of Deutsche Bank’s principal revenue sources and entered the top group of global investment banks. In 2002, he became Spokesman of the Board of Managing Directors and Chairman of the Group Executive Committee. He was appointed Chairman of the Management Board on February 1, 2006.

Ackermann is a member of the Supervisory Board of Siemens AG and of the International Advisory Council of Zurich Financial Services Group. He also plays an active role in, among other things, the Initiative Finanzstandort Deutschland (member of the Initiators’ Group), the Institute of International Finance (Chairman of the Board), the World Economic Forum (Co-Chairman of the Foundation Board), the St. Gallen Foundation for International Studies (Chairman) and the Metropolitan Opera New York (member of the Board of Advisory Directors). In 2007, Ackermann accepted an appointment as a Visiting Professor in Finance at the London School of Economics. In 2008 he has become an Honorary Professor at Frankfurt’s Johann-Wolfgang-Goethe University.

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