Deutsche Bank CEO: Banks Need to Be More Transparent
Banks need to be more transparent about the distribution of their risk across the financial system in order to restore confidence among investors, Germany's top banker said on Wednesday.
"Banks need, in future, to inform creditors and investors better about their risk exposure," Deutsche Bank Chief Executive Josef Ackermann said.
"Transparency on the distribution of risk in the system is absolutely crucial and requires a great exchange of information between the authorities and the financial institutions," he added.
Ackermann said U.S. economic growth would be affected by the troubles in the subprime mortgage market, with growth likely to be below trend this year and next, but he said the global impact had been moderate and was likely to remain so.
Deepening problems in the U.S. housing market have spilled over to credit markets and raised corporate borrowing costs, and prompted another wave of selling in equity markets on Wednesday.
Given the amount of uncertainty about the true value of complex financial products, banks should now mark the value of their assets to market, Ackermann said.
"To restore confidence and credibility in the system we have to now mark-to-market our assets ... we have to take the hit in the system," he said in a speech at the British-Swiss Chamber of Commerce.
He said this would be tough for some banks but preferable to trying to "muddle through."
Ackermann echoed comments made in a speech in Germany on Tuesday, when he said liquidity was returning to markets and the outlook for banks across the globe had begun to brighten after Germany has seen some of Europe's most high-profile victims of the subprime crisis.
Ackermann said it was "absolutely clear that the German market needs some kind of restructuring in order to create stronger banks" and he was keen to discuss this with rivals.
Two German lenders, IKB and SachsenLB, almost sank when investments linked to that market turned sour, and several more have detailed billions of euros in exposure to U.S. subprime assets.