Bank exec faults EU bank resolution changes

Deutsche Bank CEO, Christian Sewing, has rejected the European Union’s (EU) plan to update bank resolution rules, warning that it would lead to an increase in the “shadow banking sector”. He argued that making resolution the standard instrument for bank crisis management would come at the expense of the “well-functioning national deposit guarantee scheme”. His comments were made during the annual press conference for the German bank lobby, according to prepared remarks.

The EU’s proposed plans, which are due this month, aim to speed up the handling of failing banks to ensure that they are not bailed out by taxpayers but “bailed in” using their own resources. EU documents seen by Reuters showed the proposals. The banking industry is currently experiencing a period of heightened sensitivity following UBS’s merger with Credit Suisse and the collapse of several US banks, including Silicon Valley Bank.

Sewing recognised that the financial industry is more robust and resilient than it was 15 years ago and that Europe has made significant strides in banking regulation. However, he warned against tighter regulation, which could lead to further activities migrating to the “shadow banking sector”, which has already grown considerably in the wake of the financial crisis. The Deutsche Bank CEO’s remarks come at a time when there are growing concerns about the potential impact of tighter banking regulations on the financial sector.

The EU’s proposals aim to ensure that failing banks are handled quickly and effectively and not bailed out by taxpayers. However, Sewing’s concerns are that the tighter regulation could lead to further growth in the “shadow banking sector”, which is already experiencing significant growth. The Deutsche Bank CEO also acknowledged the need for a balance between effective banking regulation and the smooth operation of the banking sector.