Deutsche Bank CEO warns of ‘danger’ of European reliance on foreign banks
Deutsche Bank (DBKGn.DE) Chief Executive Christian Sewing on Friday warned of the “danger” of European reliance on foreign banks, equating the threat to the region’s dependence on outsiders for energy that has sparked crisis on the continent.
Deutsche Bank has long warned that Europe needs strong banks to counteract U.S. and Chinese competitors, but Friday’s speech took on a greater sense of urgency.
“We urgently need to change course here if we do not want to rely primarily on foreign banks to finance Europe’s future,” Sewing said at a banking conference.
“And nobody should take this danger lightly,” he said.
Sewing blamed European regulators for a heavy hand, the latest criticism by top bankers of its supervisors.
“It becomes ever clearer that the current regulatory framework does little to strengthen European banks,” he said.
Sewing praised regulators for stronger supervision that helped the industry after the financial crisis more than a decade ago.
“The issue that concerns me is that the pendulum is about to swing too far,” he said. “We should also look at where (regulation) might have gone too far,” he said.
European Central Bank (ECB) President Christine Lagarde, speaking at the same conference, warned of “undermining” regulation.
“Over-diluting regulation would leave banks more exposed to shocks and less able to support the transitions on which our future growth will depend,” she said.
One area that Sewing singled out with “significant hurdles” erected by regulators is so-called leveraged finance.
ECB supervisors have been telling banks to cut down on leveraged finance where credit is extended to already indebted borrowers.
Sewing said the business was a “legitimate segment that will play an important role in the recovery of the broader economy”.