Berlin, bank chief clash on Greece, regulation

Reuters News
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Posted: Jun 29, 2011 12:21 PM
Berlin, bank chief clash on Greece, regulation

By Annika Breidthardt and Stephen Brown

BERLIN (Reuters) - German political leaders clashed with the head of the country's largest bank on Wednesday over regulation of the financial sector and the role Greece's private creditors are being asked to play in a new aid package.

In an unusually blunt exchange at a conference on regulation, Chancellor Angela Merkel and her finance minister warned of the risks of failing to tackle the "too big to fail" and of delaying regulation while waiting for elusive international consensus.

They openly challenged Josef Ackermann, the chief executive of Deutsche Bank, who argued that unilateral steps would hurt the competitiveness of German banks and that a new banking levy would cost his bank 700 million euros after tax.

The banker told the audience of politicians from the ruling conservative bloc and members of the financial industry that the country "has pushed ahead with a series of unilateral reforms" in the crisis which were costing his bank over a billion euros.

But the center-right chancellor and her finance minister, Wolfgang Schaeuble, both argued that there was no choice but to push ahead on the national or European level because of the lack of consensus on a broader international level.

"Germany has by all means put itself at a disadvantage," Merkel acknowledged, but both she and Schaueble said Berlin was ready to accept such a cost in the struggle for new regulation.

Germany's largest bank would be among the hardest hit by a new banking levy, which would be paid into a fund to relieve taxpayers of the cost of future bank bailouts. Ackermann also cited German initiatives such as limits on naked short selling.

AVOIDING "MELTDOWN"

The Deutsche Bank chief also warned that private sector efforts to contribute to a second Greek rescue package would carry big costs for institutions like his -- though he pledged that banks like his own "will offer the politicians a solution" to head off what he warned could be a financial "meltdown."

"This comes with significant costs for us," Ackermann said, cautioning against steps to save Greece that amounted to "throwing money left and right out the window."

The CEO of Germany's second-biggest bank, Martin Blessing of Commerzbank, also pledged a contribution to the planned second bailout package for Greece, though he warned that it should avoid the need for write-downs in bank portfolios.

Ackermann said a German proposal for a voluntary rollover of Greek debt would lead to a 45 percent write-down on the bank's entire portfolio.

Schaeuble has been one of the strongest advocates in the euro zone of private sector participation in future bailouts and reiterated on Wednesday that a fair balance between banks and taxpayers needed to be found.

Merkel said another financial crisis could undermine political stability and urged greater transparency on credit default swaps (CDS), the instruments investors use to protect themselves against defaults.

(Reporting by Stephen Brown and Annika Breidthardt; writing by Noah Barkin and Stephen Brown)