18 March 2008

Deutsche Bank CEO calls for concerted actions to re-establish trust in markets

Deutsche Bank AG chief executive Josef Ackermann has called for concerted actions by governments, central banks and banks to re-establish trust in the stricken global financial markets.

"Many products are historically cheap, I cannot say if prices will fall further in the next two weeks, but we should use this opportunity now. That would be an important message for the world," he said at an industry event.

The CEO spoke out in favour of establishing an international financial watchdog.

"I advocate a council of wise men and women," he said, adding that they could point out market exaggerations and help avoid bubbles.

"I do not believe in the markets' ability to heal themselves any more," he said. Providing liquidity alone is not enough, markets need the exercise of influence from the government, he said, particularly in regard to the US mortgage and real estate market.

"I expect the US government has understood this now," he said, and he stressed the importance of isolating the problem to avoid a spillover to the real economy.

However, Ackermann said central banks had reacted well in the current crisis and also approved the Fed action in connection with the rescue mission for US investment bank Bear Stearns.

Ackermann renewed calls for banks to improve transparency, increase their capital base and establish more efficient risk, liquidity and credit management.

This includes "the ability to say no" and do without some income if the risks are too high, he explained.

Over the weekend, JP Morgan Chase agreed to acquire Bear Stearns for a bargain price of 2 usd per share -- compared with the 30 usd the stock closed at on Friday -- to avert bankruptcy at the 86-year old institution.

In addition, the US Federal Reserve approved an immediate cut in its discount rate for financial institutions and created a lending facility for big investment banks to secure short-term loans.

© Thomson Financial News