What stage of development is the world economy in right now?
The global economy is in a precarious and unstable situation. Of course, many problems have already been solved and the worst of the crisis is past. However, a number of problems and risks remain, including an imbalance in the real estate sector and the budget deficit in the US, inflation in Asia, and a crisis in the debt market in Europe. Moreover, we have a geo-political crisis in North Africa and the Middle East.
How likely is the next wave of the crisis?
A number of problems remain unsolved, and if they are not solved in the nearest future, we’re going to be hit with a new wave of the financial crisis. We are at a crossroads now: either things go the right way or we’ll face a new financial crisis. The key issue is the unresolved crisis in the European debt market.
In your opinion, how will the sovereign debt problems in Southern Europe, including Greece, be resolved?
It’s difficult to predict how this complex situation will be resolved, but the imbalances in the economies of these peripheral countries have to be addressed. First of all, we need to consider the domestic economic problems of these countries, and how they’ll be able to service their debt, and how we’ll support them going forward. Meanwhile, the political will to do that is weakening. We need to find a quick solution, but we understand that it’s impossible address an imbalance that’s has been growing for decades in the space of a month.
What is the impact of strengthening regulation (including the implementation of Basel III) on the European banking system?
I support a concrete and stringent regulatory policy. I believe that a weak regulatory system can cause serious problems. At the same time, a powerful regulatory base should be complemented with tight control. There is a double risk – a risk of fragmentation and a risk to the whole system caused by implementing a regulatory norm in each specific country. In such a situation, some questions appear: who will provide capital and long-term debt instruments on the market? We see that there are some sides that don’t want or are unable to provide the whole range of pre-crisis instruments. We face problems that could cause an economic failure over the next three years.
Compare the impact on European banks vs. American banks. Raising the minimum capital requirement leads to fewer opportunities for leverage, and therefore less earning power for European banks.
The Basel III Agreement should be implemented globally, not regionally. Every country has its own arguments for and against that step. As for Europe, the problems lay in raising taxes. Besides, we haven’t been working according to Volcker’s rule. Leverage has always been lower in Europe than in the US. The regulatory minimum is from 4.5 to 7.0 per cent, while investors expect it to be as high as 8 per cent by 2013. It’s more important for us to be consistent with the interests of investors and the financial markets rather than the regulators. European banks have to decrease their leverage. For instance, Deutsche Bank reduced leverage from 40 to 25 per cent. It was our own decision related to our desire to comply with the needs of investors and market participants.
The senior management of the European Central Bank and the IMF is changing now. What will this lead to? How will it change ECB monetary and financial policy?
The European Central Bank performed well during the crisis. Jean-Claude Trichet was replaced by Mario Draghi, former head of the Financial Stability Board. He will not change the bank’s policy dramatically. There are two candidates for the IMF Managing Director position, and both are well versed in the key aspects of how the global economy functions. I think that IMF policy is unlikely to change dramatically. In such organizations, it’s not the head but rather the team that’s of primary importance. One person may make procedural changes, but he or she won’t change the organization itself.
Which business line is the top priority for you right now?
In recent years, we sought to maintain our leadership as a global investment bank and focused on building relationships with retail customers and private banking clients. We were successful as a global investment bank, but we encountered a number of problems in the retail segment. We made a number of acquisitions over the recent year in order to strengthen our position. In the near future, we will focus on private banking.
What are the key regions for the Bank?
Our core lines of business are focused on Europe and the USA. But we operate in more than 70 countries, so we are interested in Asian, Latin American and developing counties in Eastern Europe.
Despite its achievements, Deutsche Bank is largely regarded as a global-size European bank. Will the Bank play an increasingly important role in the U.S. market, or aren’t you seeking to expand in the US?
While our home market is Germany and Europe, I believe that our positions in Asia and the US are strong. In my opinion, our bank is global, in particular, due to its multi-national staff: the Bank’s top managers come from Asia, Latin America and many other countries as well. Can we regard the US as a domestic market? No, we cannot. We have no presence on the US retail market, even though our positions there in investment banking and asset management are strong.
You recently announced plans to retire. Why have you come to this decision?
I renewed my contract until 2013, and I intend to work until then. I am very pleased with my job, I like it very much. But I’m 65, and I want to do something else.
I teach at two universities: the London School of Economics and the University of Frankfurt. I am on three boards: Royal Dutch Shell, Siemens, and Zurich Financial. I would like to go back to places I’ve visited on business as a private person.
What countries would you like to visit?
Today I was given a book about the monasteries of Russia. I’d like to travel in Russia and see them.
What about other countries?
I travel in Latin America and the Middle East a lot. I’d like to spend more time in these places and learn more about the cultures of these countries.
Who do you expect to be the next CEO of Deutsche Bank?
It doesn’t depend on me. The Advisory Board will make the decision and I’m sure they’ll find a qualified candidate. I can advise them on the issue, and we have a number of qualified candidates in the Bank.
Is Anshu Jain, head of the Corporate and Investment Bank, one candidate?
Yes, he is. We have many highly qualified employees, but we aren’t in a hurry now.
What kind of relationship do you have with VTB, three years after the team that left Deutsche Bank helped VTB to establish a successful investment bank?
According to VTB President Andrei Kostin, it was I who recommended that he establish VTB as a domestic investment bank in order to develop this business in Russia. He hired people from our team, but nevertheless we remain friends and continue to collaborate.
You’re talking about this with a smile? Haven’t you ever been in conflict?
No, we haven’t. Moreover, Andrei Kostin’s son works for Deutsche Bank, which is testimony to our good relationship.
Who are you on better terms with: VTB President Andrei Kostin or Sberbank President German Gref?
I’m on very good terms with both, and we’re friends. But you should ask them too. I have attended the Saint-Petersburg Forum for many years because German Gref personally called me and invited me to participate many years ago.
Who among your Russian colleagues do you know well and speak to frequently?
I know many people in Russia, but I won’t talk about my friends since that’s personal. I respect many Russian politicians and businesspeople very much, and I’m on friendly terms with many of them.
Will a potentially new Russian President next year influence the investment environment?
I don’t think that the change of president will have any major impact on the investment environment. European mass media often overestimate the political leader’s significance in Russia. The institutional business framework is so stable that, even though there may be a change in the President’s style, the economic and investment environment won’t change much.
Does Deutsche Bank intend to launch retail business in Russia? If so, when and how will you go about it? Will you buy an existing player?
We’re not going to get involved in retail banking in Russia now. We would need to make an acquisition to do so. The Russian market is so huge that, in order to succeed, we would have to start from scratch, to develop virgin fields. We are not pursuing this objective.
Which lines of business is the most profitable in Russia?
Investment banking and commercial banking.
Are you going to sell any assets or close down any businesses in Russia? What about private banking?
We have the same strategy worldwide. Russia is a key market for us. We want to be actively engaged in all lines of business here and we have a strong focus on private banking. We regard this line of business as promising.
How did Deutsche Bank become a bookrunner for the VTB placement? Did you take part in this process, or was the mandate generated through local efforts?
We should thank the entire team. The opinion of specialists in the field and expert opinions from other departments and business units are always important. But I was also involved and played a part in winning the mandate. I regard negotiating with corporate customers as my responsibility in these transactions.
How do you assess Moscow’s chances of becoming a Global Financial Center? What do we need to do to achieve this goal?
I am a member of the Advisory Board for Establishing a Global Financial Center. Moscow has every chance to achieve this objective and satisfies many of the criteria required to establish a Global Financial Center. One essential criterion is political will, and this has already been expressed. However, this is not a quick process. The top priority is to resolve regulatory issues as well as the issue of increasing liquidity and investment. These problems will be overcome as the economic recovery continues, and Moscow has strong prospects of becoming a Global Financial Center.
What do you associate with Russia?
Russia is a powerful country with a great cultural and historical heritage. I like the Russian people and their hospitality. And I also like the Russian cuisine. Blini with caviar is one of my favourite dishes.
Do you come here often?Fairly often. This year for example I will come back three more times - in September, October, and November. This is, of course, primarily for business, but when I have time, I try to attend a concert, a ballet performance or go to a museum. Today, for example, I went to the Hermitage to see the “Treasure Gallery” Did you like it?
Very much so, particularly the beautiful watches and the gorgeous gold crowns that belonged to Greek kings.
29 June 2011
|CV Born February 7, 1948 in Mels (Switzerland). In 1977 graduated from the University of St.Gallen|
started his career at Schweizerische Kreditanstalt (now Credit Suisse)
was appointed to the Executive Board of SKA, becoming its President in 1993
joined the Management Board of Deutsche Bank
became Spokesman of the Management Board and Chairman of the Group Executive Committee
was appointed Chairman of the Management Board Deutsche Bank AG