One of the world’s top bankers says he’s worried about the global economy and how little leverage he believes central banks have to cope with the next crisis. Deutsche Bank CEO Christian Sewing paints a dark picture and a short runway filled with experts who have run of tools.
Speaking at Sibos 2019 on Wednesday, the annual banking and financial conference hosted by the Society for Worldwide Interbank Financial Telecommunication (SWIFT), Sewing says he’s especially worried about a series of financial and geo-political risks, ranging from the situation in Hong Kong to the latest tension in the Middle East. He cited the US-China trade war as the single most critical factor that is weighing on the global economy, investors, consumers and entrepreneurs.
Despite declining interest rates and monetary policies designed to pump up economies that are under duress in the US and Europe, Sewing says there are few paths remaining to navigate the troubles.
“What is really worrying is that the central banks have used their tools to a large extent already. So there are no conventional measures left to effectively cushion a real economic crisis. They’ve already turned on the money tap to the limit. First and foremost, the European Central Bank which has now announced an even looser monetary policy. But, ladies and gentlemen, very few economists believe that cheaper money will have any effect…
The continued redistribution of wealth in favor of the asset-owning affluent and the social implications – these things aggregate…
The long-term challenge is that the global balance of power is clearly shifting. The race between the US and China is in full swing about trade – but especially over technology. This fall-out means Europe risks losing further ground if we do not seize the opportunity offered by digitization.”
Sewing notes that Europeans need to examine their stance on emerging and disruptive technologies in the financial sector. With increasing pressure from tech giants such as Facebook, IBM and Square as well as distributed ledgers and crypto assets – all of which are promising to revolutionize global finance by building bigger, better, faster and technologically superior systems – legacy players have been struggling to keep up and to respond appropriately.
Says Sewing,
“We need to take a look inwards at our own attitude towards the technological disruption that is already reshaping the global economy. What I mean: Europe should not just focus primarily on regulating new technology. Europe should drive innovation itself. This is crucial because the competition for technological supremacy will determine the future division of global economic power.”
Sewing’s speech mapping out how the world’s economies are buckling under a wide range of global economic risks happened to coincide with an overnight raid on Deutsche Bank by German authorities.
According to a report by Süddeutsche Zeitung, investigators raided the bank’s Frankfurt headquarters – in connection with Danske Bank and a massive money laundering scheme that spanned several years and racked up $220 billion.
Reports Süddeutsche Zeitung,
“Danske is probably the biggest money-laundering case in history so far: from 2007 to 2015, the Danish bank is said to have laundered up to 200 billion euros from dubious Russian sources and transferred it to the United States; most of them with the help of the US subsidiary of Deutsche Bank. The German institute acted as so-called correspondent bank.
These are partner banks through which financial institutions handle the financing of foreign trade in the domestic economy. Banks use each other as correspondent banks to do business in countries where they are not based.”
The raid was conducted on Tuesday.