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RPT-UPDATE 1-Saving Greece in German interest -Deutsche Bank CEO

(Repeats without changes to headline or text)

* German banks have blns of euros in exposure to Greece

* “Cost-benefit analysis” favours stabilising Greece

* Makes no sense to ban CDS trading

* Crisis shows need for better qualified regulators (Adds quotes, detail, background)

By Edward Taylor

FRANKFURT, March 17 (Reuters) - Deutsche Bank DBKGn.DE Chief Executive Josef Ackermann said it was in Germany's interest to save Greece since German banks -- excluding his own institution -- had billions of euros at stake.

“If the country is not stabilised, the next problem will be the banks,” Ackermann in a speech to an academic audience on Wednesday, adding that German banks had “billions in the fire.”

Ackermann said a cost benefit analysis showed it was in Germany’s interest to back measures to stabilise Greece.

The crisis had also led to a polarised view of financial markets into two “problematic schools of thinking,” namely one consisting of casino speculators and another one of conservative lenders pursuing “no frills” businesses seemingly devoid of risks.

Such simplistic characterisations of the financial world could lead to radical regulatory solutions, Ackermann warned, “be it a ban on Credit Default Swaps, Paul Volcker’s proposal to ban certain kinds of business altogether or the call to keep banks small and if possible break them up.”

Ackermann said an informed debate was needed adding that some financial products, such as currency and oil price hedging instruments and weather derivatives, had helped companies become more profitable and stable and contributed to global wealth.

The current discussion surrounding Credit Default Swaps, or debt insurance, is a case in point, he said. [ID:nLDE62G0Q2]

Blaming Greece’s woes on these financial instruments showed a “confusion between cause and effect” since the change in CDS spreads reflected the deteriorating fiscal and economic situation in Greece as well as uncertainty over domestic reforms.

“We did not need the CDS market to make investors realise that a deficit level of 12 percent is not sustainable,” Ackermann said.

Without the possibility for international investors to hedge their exposure to Greece, refinancing costs for the Greek state and companies would be higher. Furthermore, by putting a price on a Greek default, the risk had become tradable, Ackermann said.

But markets would only find acceptance if they were seen to be “reasonable, fair and orderly,” he added.

Above all the crisis had shown a need for “better, qualified” regulators, Ackermann said. (Reporting by Edward Taylor, Editing by Jonathan Gould, Leslie Gevirtz)

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