It has been a mere three years since the collapse of the investment bank Lehman Brothers plunged the world into a deep financial crisis. But now, with economic indicators offering little room for optimism, a new crisis may be on the horizon.
That, at least, was the message offered by Deutsche Bank CEO Josef Ackermann on Monday in comments delivered at a conference in Frankfurt. "We should resign ourselves to the fact that the 'new normality' is characterized by volatility and uncertainty," Ackermann said. "All this reminds one of the autumn of 2008."
The volatility was on full display on Monday as the leading German market index, the DAX, plunged to a two-year low and stocks of European banks, including Ackermann's Deutsche Bank, lost value. The price of gold once again spiked upwards as investors sought security.
In addition, the European Central Bank reported that European banks on Friday parked €151 billion ($213.3 billion) overnight with the ECB, the highest total in more than a year. The increase reflects growing distrust on the financial markets, with banks shunning the higher interest rates they would earn by depositing money with each other.
'An Open Secret'
Despite his grim message, Ackermann also said that European banks were much better capitalized and less dependent on short-term liquidity than they were on the eve of the financial meltdown three years ago. He added that banks had also managed to reduce the amount of toxic assets on their books and had improved their risk management.
But, he added, "it is an open secret that numerous European banks" would run into trouble were they forced to write down their sovereign bond holdings to reflect current market value.
Ackermann also once again blasted International Monetary Fund President Christine Lagarde for her suggestion that European banks submit to forced recapitalization. He said such calls were "not helpful" and suggested that they threatened to undermine European efforts to assist crisis-stricken euro-zone members. He said that a forced recapitalization would send the message that the European Union had little faith in its own strategy for saving the common currency.
In comments last week, Ackermann said that he "thinks nothing at all" of Lagarde's demand for recapitalization.
'A Dangerous Illusion'
The Deutsche Bank CEO said that his own bank was well positioned for difficult times, though he said that he would consider reducing costs should the situation continue to deteriorate. He also urged further European integration and warned against the collapse of the euro zone.
"The costs of supporting weak member states, particularly from the German perspective, are less than the costs of disintegration," he said. "It is a dangerous illusion to believe that a country could do better should it reclaim the sovereignty it has delegated to the EU."
Ackermann's speech on Monday was delivered at a conference entitled "Banks in Transition," organized by the German business daily Handelsblatt. The CEOs of Germany's Commerzbank, France's Societe Generale and Italy's UniCredit were also scheduled to speak on Monday and Tuesday.