Ackermann Shuns ECB Loans Because of ‘Reputational’ Risk for Deutsche Bank
Deutsche Bank AG (DBK) shunned the three-
year loans the European Central Bank offered to banks in
December on concern taking the funds could damage its reputation
with customers, said Chief Executive Officer Josef Ackermann.
“The fact that we have never taken any money from the
government has made us from a reputational point of view so
attractive to so many clients in the world that we would be very
reluctant to give that up,” Ackermann, 63, said on a conference
call yesterday.
The ECB awarded 489 billion euros ($643 billion) in 1,134-
day loans on Dec. 21 to keep credit flowing to the economy as
Europe’s debt crisis made institutions wary of each other and
drove up borrowing costs. The ECB said 523 banks asked for the
funds, which will be lent at the average of its benchmark
interest rate — currently 1 percent — over the period of the
loans starting the following day.
“I kind of agree with Ackermann’s stance,” said Matthew Clark, a London-based analyst at Keefe, Bruyette Woods. “The
idea that central bank money could be taken and used to generate
profits rather than to reduce risk is politically contentious.
It’s best to avoid it if you don’t need it.”
Deutsche Bank’s decision to avoid the loans follows the
disclosure of its borrowings from the U.S. Federal Reserve’s
emergency-loan program during the height of the credit crunch in
2008. Fed Chairman Ben S. Bernanke’s unprecedented effort to
bolster the economy included lending banks and other companies
as much as $1.2 trillion of public money.
‘Learned Our Lesson’
Deutsche Bank tapped the Fed’s program for as much as $66
billion in November 2008, according to a Bloomberg News
compilation of data obtained through Freedom of Information Act
requests, months of litigation and an act of Congress. The
largest borrower, Morgan Stanley, got as much as $107.3 billion,
while Citigroup Inc. took $99.5 billion.
“We learned our lesson during the Fed activity, where we
were encouraged to borrow money from the Fed on a confidential
level and later on the list was disclosed, and we heard that we
had to accept help from the government,” Ackermann said. “We
just don’t want to do that, and that’s why we have not
participated in the first” ECB tender.
Deutsche Bank said in December that it wouldn’t cut back on
lending as it raises capital to meet European regulatory
requirements designed to bolster confidence in the industry.
‘Carry Trades’
Taking the loans would be advantageous from a “pure
financial standpoint,” Deutsche Bank Chief Financial Officer
Stefan Krause said on the conference call. “In terms of the
bank’s liquidity and its access to the market, we really
wouldn’t need these programs.”
“We will always consider and counterbalance the financial
decision, which obviously at some of the costs that these
programs are run is quite substantial for the bank, versus what
you could call the reputational issue,” Krause said.
Yields on government bonds in Italy and Spain have fallen
since the ECB’s tender, and French President Nicolas Sarkozy has
suggested banks could use the low-cost loans to buy more
government debt.
“I’m normally not a friend of carry trades, and I don’t
think that we would borrow money to buy sovereign risks even if
there is an attractive spread,” Ackermann told analysts.
To contact the reporters on this story:
Nicholas Comfort in Frankfurt at
ncomfort1@bloomberg.net;
Aaron Kirchfeld in Frankfurt at
akirchfeld@bloomberg.net
To contact the editor responsible for this story:
Frank Connelly at
fconnelly@bloomberg.net
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Article source: http://www.bloomberg.com/news/2012-02-02/ackermann-shunned-ecb-loans-on-reputation-risk-for-deutsche-bank.html
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