Germans Must ‘Give a Little’ to Make EU Deposit Insurance Work
Germans Must ‘Give a Little’ to Make EU Deposit Insurance Work
(Bloomberg) -- Germans have to give up their resistance to sharing risk with savers in other European countries if they want to benefit from a unified financial market, according to Deutsche Bank AG Chief Executive Officer Christian Sewing.
“We in Germany will have to give a little,” Sewing said at a conference in Frankfurt Thursday. “There are big, big issues like a European deposit insurance where Germans are of course worried what it could mean. You can’t always get 100%, you just have to concede some things.”
Sewing’s comments fell largely flat among the audience at the event organized by the Frankfurter Allgemeine Zeitung, a conservative German newspaper. That was in contrast to earlier bursts of applause prompted by his criticism of the European Central Bank’s negative interest rates and his call for European Union member states to present a united front when dealing with trading partners such as China.
Germany has long been critical of jointly guaranteeing deposits across Europe, with smaller lenders arguing that it would put savers on the hook for losses on bad loans at Italian banks. Despite those concerns, others consider a combined system like that in the U.S. to be key in creating a stronger cross-border market to the benefit of the bloc’s beleaguered banks and their customers.
Sewing said he has “high expectations” of Ursula von der Leyen, the German politician who will lead the European Commission and drive financial market integration.
Deutsche Bank, which is active in 14 European countries, has to maintain legal, audit and compliance departments in each because insolvency rules aren’t harmonized like in the U.S., Sewing said.
Easy Money
He praised the ECB’s easy money policy during the 2012 sovereign debt crisis, but said policy makers should have charted a way out of negative rates. Cheap borrowing costs are widening the gap between rich and poor and Europe as a whole is suffering because countries didn’t have an incentive to pursue reforms, he said.
Japan’s experience of more than two decades of low interest rates also serves as a warning, according to Sewing, who said he spoke to the head of a Japanese company earlier in the day.
“That affects citizens’ mentality and the mentality about growth, which ends up going missing,” he said. “It is enormously important that we try to move away from this low interest policy step-by-step.”
To contact the reporters on this story: Nicholas Comfort in Frankfurt at ncomfort1@bloomberg.net;Steven Arons in Frankfurt at sarons@bloomberg.net
To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Iain Rogers, Daniel Schaefer
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