By: MoneyNews.com
Deutsche Bank AG Chief Executive Officer Josef Ackermann said unregulated financial companies such as hedge funds may pose a systemic risk to the economy if oversight isn’t increased.
“You have an unregulated area which becomes — as a consequence of all the regulatory changes — more and more important,” Ackermann, 62, said in an interview at the World Economic Forum in Davos, Switzerland. “You may one day wake up and realize that the systemic challenges are so big that you will have to bail out or at least help support the unregulated sector.”
Ackermann’s warning echoes comments made by former U.S. Treasury Secretary Lawrence Summers, who said this week in Davos that regulators haven’t paid enough attention to problems that could emerge in “a large, less healthy buccaneer sector.” Hedge funds have dodged the brunt of new global banking regulation aimed at avoiding a repeat of the worst global financial crisis since the Great Depression.
“If you separate utility banks from casino banking, you will one day realize that casino banks are also counterparties to corporations but also to other banks and to asset management and to governments,” Ackermann said yesterday. “It would be somewhat naïve to assume that if you have a strong regulated sector and leave the unregulated in the open, that you will never have systemic risk.”
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