The Federal President admonishes the banks

For Steinmeier, cases like Greensill and Wirecard are wasting trust. Deutsche Bank boss Sewing considers higher bank profits to be necessary – but not an end in itself.

Frank-Walter Steinmeier

Christian Sewing has called on the German banks to become more profitable, otherwise the economic capital requirements cannot be met. “Profit must not be an end in itself, profit must be the result of a meaningful activity,” said the CEO of Deutsche Bank in his speeches at the digital event “Bankentag” on Monday afternoon, after he had previously spoken in the morning from the board of the 200-member federal association German banks had been elected President, as expected. “I am assuming this office because I am convinced that Europe’s largest economy will need a strong financial sector even more than usual in the years to come,” said Sewing.

There is an investment gap in Europe, especially in future technologies such as artificial intelligence and sustainability. “We banks play a central role. We are the transmission belt between financial markets and companies, we channel investments, ”said Sewing. He described it as a central goal of his initially three-year term of office to help banks actually play this role and thus “stand in the middle of society and serve society”.

Steinmeier demands the maintenance of trust

After the financial crisis, many businesses came to light in the 2010s that severely shook confidence in banks. Federal President Frank-Walter Steinmeier therefore warned at the same event not to jeopardize the trust that had been regained after the financial crisis. The rebuilt trust “should be guarded and cultivated, because it is the foundation for the stability of our currency and our financial system,” said Steinmeier. “Cases like the insolvent Bremer Greensill Bank and even more so the Wirecard case, on the other hand, are likely to gamble away the trust that was painstakingly regained,” said Steinmeier.

Sewing said that in the pandemic, banks had proven to be very capable of acting as financiers. In order for it to stay that way, he, as a soon-to-be bank lobbyist, also tried to make the bank supervisors responsible. Mergers among banks (“consolidation”) would accelerate. Europe’s institutions threatened to fall behind American and Asian banks – also because framework conditions impaired their profitability. As a countermeasure, Sewing suggested that the bank resolution fund, into which Europe’s banks would have to pay around 11 billion euros in 2021 alone, should not grow to 78 billion euros. “If it stayed at the originally targeted fund volume of 55 billion euros, European banks could grant additional loans in the three-digit billion range,” he calculated.

Not surprisingly, Sewing also opposed higher capital requirements (“Basel IV”). “That would make bank lending considerably more expensive in the next few years – and we would be at a disadvantage compared to non-European competitors.” Sewing, on the other hand, sees sustainable (“green”) financing as a competitive advantage for European banks. “We have to build on this by finally making one out of 27 capital markets in Europe”, he called for an end to the “patchwork” of different insolvency, securities and consumer regulations in Europe. Banks could not fill the investment gap with their loans alone. “A further developed capital market is indispensable for what is probably the greatest challenge that modern mankind has to face: the fight against climate change.”

Support for ECB

Sewing spoke to journalists in favor of the European Central Bank (ECB) launching its own purchase program for “green bonds”. And the current president of the banking association, Hans-Walter Peters, usually a sharp critic of the low interest rate policy, praised the ECB for ignoring higher inflation at the moment. “The economy has to get going again after the pandemic,” said Peters. Sewing called the strong upswing in Asia a great help for the export economy. Yes, there will be bankruptcies, but he reckons with “no material” losses for the German economy as a result of the pandemic, and SMEs in particular are robust.

In addition, Europe could build on functioning social systems and instruments such as short-time work. “We don’t have to send people home undifferentiated checks,” Sewing said, referring to stimulus aid in America. “We shouldn’t succumb to the temptation of short-term effects, but should invest a considerable part of the European rescue packages in the long term.”

In addition to bank loans, public investments geared more towards climate protection and a deeper capital market, Europe must also assert itself geostrategically, warned Sewing. He suggested “a new systemic alliance for democracy, digitization, sustainability and fair competition”. “Only then will Europe have a chance to shape the standards. Or we will have to subordinate ourselves to the standards – politically and economically. ”Even with respect to its partner United States, Europe must“ develop from the continent of self-doubt to a continent of self-assertion ”.

Specifically, he called for steps towards a stronger Europe: a defense union and a common foreign policy, the strengthening of the euro as the reserve currency, the completion of the internal market not only for goods but also for services and faster decisions and more consistent action at all levels of government. “In China, it is said, the state determines the course, in America the private sector,” said Sewing, adding. “But too often in Europe the bureaucracy. We should do everything we can to change that. “