UPDATE 1-ECB Asks Deutsche Bank To Simulate Costs Of Winding Down Trading – CFO
The European Central Bank has asked Deutsche Bank to estimate the cost of narrowing its investment banking business, the first simulation of one of Europe’s largest banks, the chief financial officer of Deutsche Bank. said Monday.
But Finance Director James von Moltke said the ECB’s request was not an abnormal exercise and it was completely unrelated to Deutsche’s internal assessment of global investment banking.
“We think we are at the forefront here because we are the biggest capital market bank in the ECB,” von Moltke said in an interview with Reuters.
The timing of the simulation is very sensitive because Deutsche Bank’s investment banking division has lost market share and key personnel, contributing three consecutive years of losses to its largest lenders.
Last week Deutsche overturned CEO John Cryan and Marcus Schenck, one of the investment bankers, left. The management turmoil has raised speculation that Deutsche Bank may reduce its investment bank performance.
An ECB spokesman declined to comment on individual banks. “There are lots of exercises like a recovery plan that supervisors ask banks to provide,” she said. “In any case, the ECB does not interfere with any business model decisions of banks.”
Deutsche Bank, by talking publicly about common private surveillance practices, wants to avoid the impression that managers are concerned about investment banking.
The bank has been stabilizing since late 2016, when it speculated that a government bailout would be needed after huge fines from the US administration.
Global managers are working on unified procedures for drills like Deutsche’s plans. Managers focus on major global banks that trade risky securities such as derivatives.
Managers have classified some banks as “biologically important” because of their size. They have identified Deutsche Bank as the most important systematic bank in the euro area.
Managers in the UK conducted similar simulations with Deutsche’s arm in London.
Sueddeutsche Zeitung said the exercise may clarify whether the suspension of commercial activity requires government guarantees or taxpayers’ support. The German article was the first to report simulated news.
Von Moltke said: “This does not involve any state support.
Deutsche Bank started work in late January and hopes to end it in the third quarter.