Deutsche CEO Calls for Global Financial Supervision

The global financial markets need more international supervision and institutions such as the International Monetary Fund must play a larger role, the CEO of Deutsche Bank said in a newspaper column on Wednesday.

In the article about lessons from the crisis published in Swiss daily Neue Zuercher Zeitung, Deutsche Bank Chief Executive Josef Ackermann called for a "radical change in thinking" about international supervision.

"It has become apparent that internationally integrated financial markets and basically national supervision structures don't go together," Ackermann said.

"The choice is obvious: Either we are ready to think about supra-national elements in financial supervision or we accept a renationalization of financial markets and the resulting losses in wealth," he said.

To avoid these losses, regulators' ability to act pre-emptively should be harmonized internationally and all regulators should have the adequate instruments.

Ackermann also called for an international procedure to liquidate systemically relevant institutions and sanctions against countries whose supervision regime did not meet international standards.

"All this will not be possible without a strengthening of the powers and the institutional structure of international organizations such as the International Monetary Fund and the Financial Stability Board," he said.

Governments, central banks and regulators across the globe are drawing up a new regulation regime after the financial crisis exposed the shortcomings of the existing system.

AP

The European Union wants to create pan-European watchdogs and U.S. President Barack Obama announced what he called the most sweeping reform of U.S. financial supervision since the 1930s.

Ackermann said banks had to improve their risk management to avoid the mistakes that lead to the crisis.

Banks also should hold more capital, though the focus should remain on a risk-oriented, model-based approach.

"A return to supposedly simple instruments such as a leverage ratio would be a severe setback," he said.

Switzerland has already introduced a leverage ratio, which caps the total amount of debt a bank can incur, for its two large banks UBS and Credit Suisse.

Banks and regulators had to better address liquidity risks in the future and to improve transparency on risks, Ackermann said.

Finally, the market infrastructure should be changed in a way that would allow it to cope even with the disappearance of big market players, he said.

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