Deutsche Bank CEO apologizes after critical analyst report

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(Bloomberg) – Deutsche Bank AG CEO Christian Sewing has apologized to Germany’s finance ministry and the country’s top regulator for the scathing criticism from one of the company’s research analysts, seeking to avoid tensions with two of its most important stakeholders ahead of elections this month.

Analyst Jan Schildbach – in a note earlier this week on the reforms Germany needs as a financial center – criticized the “qualifications” of regulators as well as a “failure” of the pension system backed by the government. government. Sewing told German officials that Deutsche Bank did not share these views, people familiar with the matter said, who asked not to be identified.

The rare mea culpa highlights the sensitivities of Deutsche Bank’s sometimes strained relations with regulators, as well as the urgency to be on good terms with the next German government. Left Social Democrats Finance Minister Olaf Scholz is the favorite to succeed Angela Merkel. His ministry oversees BaFin and also has a role to play in shaping much of the regulation criticized by the Deutsche Bank analyst.

A spokeswoman for BaFin, the regulator, declined to comment, as did Schildbach. A spokesperson for Deutsche Bank declined to comment on the company’s contacts with authorities, while the finance ministry did not immediately respond to an email request for comment.

German finance has lagged behind its international peers over the past decade as tighter regulation under Merkel weighed on returns and the failure of aggressive growth plans imposed high legal bills on big banks. . She defended regulation that prompted institutions to reduce risk and focus on the lending sector, but failed to create a functioning single market for banking services that would have enabled European investment banks to compete more easily with Wall Street.

A summary of the report, sent by the bank before a link to the full memo was disabled, highlighted the following areas requiring reform:

Deficits in the culture and qualifications of regulators after a series of scandals A banking market divided between savings, cooperative and commercial banks that prevents consolidation and gives an advantage to foreign lenders pensions have “failed” and the state has reduced incentives for savers to make their own investments

Speaking at a banking conference earlier this month, Sewing said he was “on the same page” as the Department of Finance on issues such as completing the European banking union. Scholz “knows exactly” that a nuanced view of the German economy is needed when implementing stricter capital requirements for banks, Sewing added.

Deutsche Bank and its research division publicly distanced themselves Wednesday from “inappropriate criticism of substance and tone from regulators and policymakers that has been expressed.” The analyst has expressed his own views, which are not shared by Deutsche Bank and have not been cleared by the leadership of the research division, a spokesperson said.

Schildbach is not the first analyst to be censored for research deemed too critical or which has sparked controversy. UBS Group AG has temporarily put its chief economist on leave in 2019 due to remarks it made about pork in China that caused a firestorm locally. JPMorgan Chase & Co. apologized in 2010 after a senior economist at the bank said U.S. senators showed their ignorance of the market economy, while the company also saw its business in Indonesia curtailed in 2016 after having downgraded the stock market.

Other excerpts from Schildbach’s memo reported in local media contained the claim that Germany “is the only industrialized country” to have experienced so many scandals in the last 15 years in which the financial regulator has drawn up “An image as bad and sometimes dysfunctional” as BaFin.

The finance ministry replaced BaFin chairman Felix Hufeld as part of a larger overhaul after a series of scandals following the collapse of Wirecard AG. BaFin failed to uncover the electronic payment company’s fraud and appeared to protect Wirecard by banning betting against its actions while investigating journalists who reported irregularities. BaFin rejected the allegations of bias, but struggled to shake off the image of too slow a job.

Hufeld has been replaced by Mark Branson, who previously headed Swiss regulator Finma.

(Updates with context on other analyst remarks in the ninth paragraph)

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