Deutsche Bank CEO Ackermann Slammed: 'One of the Most Dangerous Bankers in the World'
Former IMF chief economist Simon Johnson has attacked Deutsche Bank CEO Josef Ackermann in an interview with a German newspaper. Johnson said that Ackermann was "dangerous" because of his excessive profit targets and accused him of taking excessive risks at the taxpayers' expense.
A former senior International Monetary Fund official has said that Deutsche Bank CEO Josef Ackermann is "one of the most dangerous bankers in the world."
For many people, Deutsche Bank CEO Josef Ackermann is a hero of the German business world. But for one leading economist, at least, the Swiss banker is nothing less than a villain.
Johnson singled out Ackermann's famous target of a 25 percent pretax return on equity for particular criticism. He said such returns were only possible because Ackermann knows that Deutsche Bank is too big to fail and that it would be "rescued by taxpayers" if it was faced with bankruptcy. Return on equity is calculated by dividing profit by the capital invested.
Johnson, who was chief economist of the IMF from March 2007 to August 2008 and now teaches at MIT, is considered an expert on financial crises. He is the co-author of the popular blog "The Baseline Scenario," which examines the causes of the 2008 crisis and its aftermath.
In Johnson's view, there is the danger of a new crisis occurring if the capital rules for banks are not made significantly tighter. He told the newspaper that the new Basel III rules -- which will require banks to hold top-quality capital equal to at least 4.5 percent of assets by 2015, rising to 7 percent by 2019 -- are "absolutely useless." Instead, he argues, bank capital reserves have to be equal to between 20 and 45 percent of total assets. Deutsche Bank currently has a capital ratio of just 4 percent, he said.
'Recipe for a New Crisis'
Ackermann's target of a 25 percent return on equity has long been considered controversial by some bankers and politicians, who claim it far exceeds profit margins in other industries. "The fact that banks and investors expect a return of 25 percent, while customers and companies earn returns of less than 10 percent, means that things will inevitably go wrong," Frank-Walter Steinmeier, a senior member of the center-left Social Democratic Party, said back in 2008.
Deutsche Bank has always rejected such criticism, claiming that statistics show that German industry as a whole generated average returns on equity of over 30 percent in the period 1994 to 2007. The bank also argues that it needs to offer investors high returns in order to be able to compete with other industries for scarce capital.
dgs - with wire reports
Stay informed with our free news services:
© SPIEGEL ONLINE 2011
All Rights Reserved
Reproduction only allowed with the permission of SPIEGELnet GmbH
Corriere della Sera
MORE FROM SPIEGEL INTERNATIONAL
German PoliticsMerkel's Moves: Power Struggles in Berlin
World War IITruth and Reconciliation: Why the War Still Haunts Europe
EnergyGreen Power: The Future of Energy
European UnionUnited Europe: A Continental Project
Climate ChangeGlobal Warming: Curbing Carbon Before It's Too Late