| FRANKFURT, June 11
FRANKFURT, June 11 An overload of global
regulation threatens to stifle Europe's banking system and
constrain economic growth, Deutsche Bank AG Co-Chief
Executive Anshu Jain warned on Tuesday.
"Over the past five years, the banking industry has reformed
itself, and been reformed, at an unprecedented pace. But now, in
Europe, there's a risk the pendulum may swing too far," Jain
told an audience at Frankfurt University's Centre for Financial
"If all the measures before us were implemented as proposed,
they would practically spell the end of over 100 years of
universal banking in Europe," Jain said.
Universal banks are lenders with diversified business models
which often combine retail banking, investment banking and
wealth and asset management activities. Having a diverse set of
business activities helps banks withstand market disruptions,
"I am not questioning the importance or needs for
governments to regulate banks or other large businesses," said
Jain, who has been co-chief executive for just over a year. But
the cumulative impact of new rules may cripple the ability of
banks to provide loans to the real economy, he said.
In the aftermath of the 2009 G20 summit in Pittsburgh, which
helped inspire a comprehensive re-regulation of the banking
sector, the supply of loans to the economy suffered in Germany.
Lending to German businesses by foreign banks fell by 30
percent in the two years following the 2008-2009 financial
crisis, Jain said.
Banks are once again facing a raft of new rules. In Europe
alone, the largest banks face extra capital requirements for
systemically important financial institutions, bank levies, as
well as proposals to limit leverage and plans to separate
investment banking from deposit-taking activities.
Just one of these pieces of regulation, a new German law
that requires separating trading activities from deposit-taking,
would raise the cost of funding for businesses and governments,
"Its too early to predict the exact impact of the (law).
much depends on detailed interpretation by the regulator between
now and 2016," Jain said.
This comes on top of other rules, such as the Volcker rule
to curtail proprietary trading activity, and regulatory
proposals to force foreign banks to hold extra capital in the
Having a system of robust universal banks in Europe is vital
for the economy, the India-born executive said.
"A globally diversified balance sheet means less risk
concentration. This means we can provide more credit for
business. That's crucial in Europe where 70 percent of credit
creation is provided by banks," Jain added.
Deutsche Bank has been able to accumulate liquidity reserves
of almost a quarter of a trillion euros, a cushion which makes
it easier to survive in a crisis, Jain said.