EU Bank Recapitalization Plan Faces Strong Opposition

October 14 00:00 2011

The recapitalization debate in the European Union took a new turn today with the Deutsche Bank Chief Executive, Josef Ackermann, indicating that his bank is going to oppose efforts by the EU to force banks to increase their capital reserves. Ackermann communicated to the German Finance Minister in no uncertain terms, that there should be no attempt to preempt the Basel III rules which contravene the present risk assessment norms for European Banks.

According to Ackermann, “It cannot be in the interests of stabilizing the financial markets to fabricate an imaginary weakness of the European banking industry through the artificial tightening of capital requirements.” This is seen as a strong rebuttal of the European Union’s controversial plan for bank recapitalization aimed at controlling the financial crisis with respect to the common currency. The plan is being opposed tooth and nail by German banks, known for their consistency and stability.

The degree of opposition to the EU recapitalization plan by the German banking industry is further manifested by the Deutsche Bank chief’s aggressive stand wherein he said that if the plan entails borrowing from state funds, it is preferable to sell off vital units of his institution rather than face such discomfiture. Ackermann feels that implementation of this controversial plan could result in “greatly reducing the balance sheet, and possibly even separating from activities that are very much in the strategic interests of the bank.”