And they call them the smart money?!!
According to Stefan Krause, a member of the bank’s board, Deutsche Bank has benefited from lower funding costs in part because investors confused it with Germany’s central bank, the Bundesbank.
The topic came up at a panel discussion in Dusseldorf on Wednesday as Krause was elaborating on a comment by panel member Clemens Fuest (the president of the ZEW Center for European Economic Research), who pointed out a number of studies have demonstrated that “too big to fail” banks like Deutsche Bank typically get lower interest rates than smaller banks. Krause agreed with Fuest, and noted that Deutsche Bank also benefits from being mistaken for the German Central Bank.
Statement from Deutsche Bank’s Stefan Krause
“It’s not Deutsche Bank’s wish, but you could almost say that because of our name, a large part of the capital market thinks we’re the Bundesbank,” Krause said. “Global refinancing markets always offered Deutsche Bank good conditions because in the heads of the people there was always an implicit state guarantee.”
“People would often tell me that they knew Ackermann, but what was Weidmann’s role and why were there two German central banks?” Krause explained, making reference to ex Deutsche Bank CEO Josef Ackermann and Bundesbank President Jens Weidmann. “You have to say that Deutsche Bank did naturally have — and this also led to our business model — an almost sheer unlimited refinancing ability and the ability to build up a sheer endless balance sheet.”
DB did not expect to be bailed out
However, Krause also noted during a separate speech at the conference Wednesday that the too big to fail bank’s leadership never ran the company with any assumption it would be bailed out by the German government.
“I can’t remember a single meeting in my time at Deutsche Bank in which we discussed that we actually thought that the company couldn’t go bust or that it would be rescued,” Krause noted. “We are indeed a business and can naturally run into trouble.”