BILDERBERGER ACKERMANN WANTS BIGGER BANKS
Josef Ackermann, the Bilderberger who runs Deutsche Bank which has just posted massive profits along with other Bilderberg banks, has been able to have a comment of his published in The Financial Times today in which he argues for even bigger international banks.
Despite the fact that such big international banks have just tanked the global economy due to their greedy reckless gambling and have been bailed out with trillions of public money, he wants such big international banks to grow even bigger, to facilitate wider and faster globalisation.
He addresses the debate about banks being too big to fail by arguing that the big banks are currently too interconnected and that they should somehow be disconnected.
Eh? Say what?
I don't understand that argument because even if such big international banks could be disconnected they would still be too big to fail, and still connected by Bilderberg, and Ackermann does not use that B word.
I can think of one popular word beginning with B that could describe Ackermann but I don't use such foul language.
And look at Ackermann's mates at the IFF; the usual suspects, Bilderberg CFR Nazis!
Smaller banks will not make us safer
By Josef Ackermann
Published: July 29 2009 21:37 | Last updated: July 29 2009 21:37
Two years into the financial crisis, the longer-term repercussions for the global financial system are becoming more discernible. Progress is being made on the implementation of the Group of 20 action plan and we must not let up in our efforts. Industry as well as political leaders must ensure that arrangements found deficient, instruments found wanting and industry practices found inappropriate are not re-established. It is equally important that the cumulative effect of the various proposals is kept under consideration. For instance, a number of regulatory changes will lead to higher capital requirements, and care should be taken that the aggregate effect does not exceed levels deemed sufficient in the interest of an appropriate balance between stability and the ability of the financial system to raise the funds necessary for global growth.
It is also vital to maintain an internationally harmonised approach. There is a danger that changes in the regulatory environment will, by accident or design, lead to a refragmentation of markets. It is understandable that national regulators and governments, chastened by the experience of having to clean up after banking failures, try to limit the potential costs to their jurisdictions. But the proposal that large, internationally active financial institutions should essentially be reduced to holding companies of national operations that are organised as stand-alone units is not the right answer.
In fact, such a structure would enhance rather than reduce risks to financial stability, as it would create trapped pools of liquidity and capital. Banks would not be able to manage their risk, capital and liquidity on a consolidated basis. This would make the allocation of capital in the economy less efficient in normal times and render an efficient response more difficult in times of tension. It would also have severe implications for the growth prospects of smaller countries with a limited deposit base.
Consequently, we should not seek answers in the perceived safety of nation-based structures, but rather establish effective processes for cross-border crisis management. It is not the existence of global financial institutions that creates unnecessary economic costs for our societies in a crisis situation, but the lack of internationally co-ordinated crisis management. Thus, we need to develop an internationally consistent intervention and resolution scheme for complex global financial institutions.
Apart from the danger of market refragmentation, there is another intense debate on banks’ size. A new doctrine is taking hold: if banks are considered too big to fail, then they are too big – and should, hence, be downsized. In line with this thinking, the Swiss National Bank (SNB) was the first authority to explicitly suggest that a leverage ratio of over 20 was “not prudent and undesirable in good times”. Undoubtedly, the excessive leverage of some institutions aggravated the crisis. That said, I feel that the focus of the discussion on banks’ size has shifted away from what the issue actually involves: it is not size as such that is the problem but the interconnectedness of banks. Neither Lehman Brothers nor Hypo Real Estate were big, but their interconnectedness with the rest of the financial system turned their respective failures into a problem.
So what we need to look for are not limits to the size of banks but mechanisms to reduce interconnectedness. To be fair, this approach, rather than a cap on leverage, is indeed what the SNB suggests as the superior solution: large banks should hold capital and liquidity buffers that account for the systemic risk they pose and, most importantly, market structures and the organisational structure of large banks must be changed so as to enable an orderly winding-down that does not cause a systemic crisis.
These structures must not result in banks having a pre-determined breaking point along national lines. Rather, the key issue here is to design market infrastructures in a way that allows them to be insulated from the failure of any single participant, especially that of systemically important institutions. System designs that rely on central counterparties are one example. It may also be useful to make business lines such as payment systems bankruptcy-remote, so that their insolvency would not affect the groups of which they are part. This does not mean that they must be run as public utilities, but rather that they must be organised so as to prevent negative spillover from unrelated market segments into the vital infrastructure of the financial system.
It has been reassuring to see that the response to the crisis has been an unprecedented effort, both among officials and in the financial industry, to forge a global consensus on the measures needed to make the financial system more resilient. We have, thus far, wisely avoided the temptation to resort to national answers. This attitude reflects the conviction that market integration, if pursued in an adequate regulatory framework, is beneficial to our economies. As evidenced in the period prior to the outbreak of the crisis, market integration can harness the world’s financial resources to fight poverty and raise growth rates, while it also allows for a quicker transfer of financial expertise as well as for asset and risk diversification.
It is equally important to recall that large banks are useful to the economy and business. They finance and hedge risk for companies that are active globally. They have the capacity to finance, arrange and handle the complexity of large deals. Moreover, large banks can better afford the increasingly expensive investments in information technology, risk management and market infrastructure that are also conducive to enhancing financial stability. As we move forward in our quest to make the global financial system less prone to crises, we would be well advised to bear this in mind.
The writer is chief executive of Deutsche Bank and chairman of the Institute of International Finance