Trench Warfare in Frankfurt: Conflict Erupts as Deutsche Bank Charts Its Future

By Martin Hesse and Anne Seith

Incoming Deutsche Bank chiefs Anshu Jain and Jürgen Fitschen are making short work of the Josef Ackermann era. While shareholders are ecstatic, German politicians and regulators are more wary of their leadership. Top managers are waging an unseemly battle for influence.

Photo Gallery: Infighting at Deutsche Bank Photos
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Anshu Jain's hour of confession is scheduled for a Saturday, because he doesn't have any time during the week. For Deutsche Bank's top investment banker, it'll be one of the most challenging meetings of his life. The American real estate market has just collapsed. Jain and his dealers had invested billions in the market when it was still booming.

It's a weekend in November 2008, and Deutsche Bank CEO Josef Ackermann and his top risk manager, Hugo Bänziger, are at Jain's office on Great Winchester Street in London. They have come to find out what horrible news they can expect from Jain's realm in the coming weeks. The mood is apocalyptic at the round conference table. Rarely have these investment bankers, ordinarily celebrated as "rainmakers," been this subdued. Some, fearing a total crash, have reportedly already withdrawn tens of thousands of British pounds from their accounts and taken the money home.

Speaking in funereal voices, they describe the losses they expect for Deutsche Bank to Bänziger and Ackermann. It's an enormous number. Then Bänziger and Ackermann read out their list of immediate measures that will have to be taken.

One of the key points is that Jain will have to drastically reduce the practice of proprietary trading, which saw his most skillful financial acrobats gambling with the bank's money. These are among the darkest hours of Jain's career.

Open Conflict

Today, almost three-and-a-half years later, Jain, 49, is back on top. On June 1, he and Jürgen Fitschen, 63, will become co-CEOs of Deutsche Bank. His former overseers, Ackermann and Bänziger, will then leave the bank. At that point, even the investment banking guru's toughest times will be recast as successes. Jain's associates say that the early decision to reduce proprietary trading, long before laws to curb the practice were even considered, is evidence of the Indian-born British citizen's sense of responsibility and ability to adapt.

Shareholders tout the upcoming transition of power at Germany's largest bank as an "act of liberation." Regulators and politicians, however, are alarmed. "Now we have someone at the head of Deutsche Bank who sees it as a global corporation that happens to be headquartered in Germany," says a politician with Germany's center-right Christian Democratic Union (CDU), who, like many at the moment, doesn't want to be quoted by name on the subject of Deutsche Bank. And in the bank itself, open conflict has erupted since Jain's appointment.

"The investment bankers are assuming power," say some. They fear that Deutsche Bank will lose sight of its roots, and they point to the questionable deals Jain's troops were making in the wild days before the financial crisis.

"The old guard can't let go," say others. They see the most recent turf battles as a desperate attempt by Ackermann and his supporters to put obstacles in the way of their successors.

Three men are fighting for their reputations at Germany's largest lender. Jain is determined to avoid being branded as a cold-hearted gambler. Future co-CEO Fitschen is fighting against being labeled a figurehead. Finally, Ackermann is desperate to defend his reputation as a major banker who steadily guided Deutsche Bank through the financial crisis and, as a savior of the financial system, negotiated with the world's most important players.

To some extent, the conflict has about as much entertainment value as a Bollywood comedy. Nevertheless, there is a question that remains unanswered, one that is more important to regulators, politicians and taxpayers than the battle of the financial titans: Where exactly is the bank, which regulators believe is more critical to the stability of the global financial system than almost any other lender, headed?

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