Deutsche Bank Hits Back at U.S. Think Tank Over Capital Buffers

(Bloomberg) -- Deutsche Bank AG on Thursday hit back at a Washington think tank that had criticized the German lender for letting its capital buffer shrink to help pay for its restructuring.

Chief Financial Officer James von Moltke, in a letter posted on Deutsche Bank’s website, said an opinion piece by Better Markets co-founder Dennis Kelleher and his colleague Joseph Cisewski in the American Banker was a “gross misrepresentation” of the lender’s restructuring plan.

In their piece, Kelleher and Cisewski argued that “reducing capital to increase short-term returns for shareholders is grossly irresponsible.” They argued the move jeopardizes the resilience of the lender, at a time when it struggles with high funding costs and headwinds from lower interest rates, and could ultimately leave U.S. taxpayers on the hook.

That interpretation was “groundless,” Deutsche Bank’s von Moltke wrote, pointing out that the bank was using its existing resources to fix long-term challenges at the expense of short-term returns. The reduction in a key measure of capital strength will leave the bank well above regulatory requirements and in line with peers, and was warranted because its new business model is less risky, he wrote.

“Our capital and liquidity ratios and the levels of risk that we are running are among the most prudent in the industry,” von Moltke wrote.

Deutsche Bank in early July unveiled its biggest-ever restructuring, centered around 18,000 job cuts over the next few years. Sewing has said the bank won’t raise fresh capital to fund the turnaround and instead will draw down some of its capital cushion. The lender also suspended its dividend to shareholders.

Sewing’s plan will make the bank “even safer and stronger than it is currently and will be done without the need for external support,” the CFO wrote in his letter. “We would have appreciated it if these cornerstones of our strategy had, in any way, been reflected in this opinion piece.”

To contact the reporter on this story: Steven Arons in Frankfurt at sarons@bloomberg.net

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Christian Baumgaertel

©2019 Bloomberg L.P.