Deutsche Bank chief executive Christian Sewing has called on politicians and regulators to overhaul rules that “structurally disadvantage” European banks against their US rivals.
The German lender’s CEO said that the “pendulum has swung too far”, with moves put in place in the wake of the 2008 financial crisis to stabilise European banks instead forcing them further behind competitors headquartered in the US.
“Admittedly, our industry has done well in recent years and, in a difficult environment, has achieved a level of stability and profitability that few had thought possible,” he said during a speech at the Frankfurt European Banking Congress on 18 November. “Nonetheless, the gap between us and our US competitors has not tightened.”
“Fifteen years after the global financial crisis, it is time for regulators to acknowledge the positive developments we have seen,” he added. “And that ultimately means that instead of further expanding and tightening regulation, we should also look at where it might have gone too far.”
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Sewing called on regulators to loosen European restrictions around leveraged finance, a core focus for Deutsche Bank and an area that has caused some rivals to recently book losses on loans struck earlier in the year when credit conditions were more favourable. Sewing said that “punitive buffers” imposed on domestic banks by regulators make it more difficult to compete.
“This underlines how Europe still tends to treat financial sponsors as something distasteful,” he said. “But when we look at the US, a lively venture capital market, but also private equity industry is part of an ecosystem which is much more effective in supporting innovation and growth than we have in Europe.”
Sewing added that Basel III, regulation that imposes strict capital requirements on European banks, also puts them at a global disadvantage, and that the continent risks losing its leading position in sustainable finance — also a key focus for Deutsche Bank executives.
“Sustainable finance has become a key sector for banks and we in Europe are leaders in this field,” he said. “However, I fear that we will soon lose this leadership if regulation continues as it has. Companies and banks are busy implementing different and overlapping regulations at the same time, and new ones are coming all the time.”
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