Nov. 11 (Bloomberg) -- Deutsche Bank AG Chief Executive Officer Josef Ackermann said governments should give up stakes in banks after state-led bailouts help calm financial markets.

``Well-defined exit strategies need to be formulated and implemented,'' Ackermann, writing as chairman of the Institute of International Finance, said in a letter addressed to President George W. Bush ahead of a meeting of world leaders in Washington Nov. 14-15.

Governments from the U.K. to Iceland to Washington have committed more than $3 trillion to try and stem the worst financial crisis since the Great Depression. Companies such as Royal Bank of Scotland Group Plc and American International Group Inc. have received emergency state funding in return for stakes.

A permanent, larger role for the public sector in financial companies would bring ``wide-spread inefficiencies,'' hurting the chances of renewed growth in output and jobs, Ackermann said in his letter, posted yesterday on the Web site of the Washington-based IIF, an association of financial institutions.

The leaders of the Group of 20 industrial and emerging countries meet in Washington this week amid looming recession. The world's biggest industrialized economies will all contract next year for the first time in more than half a century as the financial-market seizure leaves companies and consumers starved of credit, the International Monetary Fund forecast this month.

Global Writedowns

The collapse of the U.S. subprime mortgage market has led to about $918 billion in writedowns and credit-related losses worldwide and forced financial companies to raise $824 billion in capital, according to Bloomberg data.

In Germany, Europe's biggest economy, where the government rushed a 500 billion-euro ($628 billion) bank-rescue plan through parliament Oct. 17, Chancellor Angela Merkel has said banks must yield a stake in return for tapping state funds.

``We're offering something and they have to offer something in return,'' Merkel, who will attend the Washington meeting, told lawmakers in Berlin last month.

A majority of Germans meanwhile favor the state having a say in the running of the financial industry, as well as rail and postal services, a Forsa survey from Oct. 29 showed.

British Prime Minister Gordon Brown's plan to buy equity stakes in banks became an international template. The Treasury has said it will manage its holdings in banks including RBS, Lloyds TSB Group and HBOS Plc in a ``commercial way,'' though it wants banks accepting funds to cut bonuses and promise to restore lending. Germany has set pay caps on bank executives accepting state aid.

`Signs of Stability'

Ackermann praised the concerted actions among governments, central banks, regulators and the IMF that have helped bring ``some signs of stability to financial markets.'' Still, policymakers need to take additional coordinated steps including on monetary policy to foster a recovery in financial markets and to avoid a ``severe'' global recession, he wrote.

European Central Bank council member Guy Quaden said late yesterday he expects the bank to reduce its forecasts for economic growth and inflation ``substantially'' next month, paving the way for lower interest rates. The Bank of England lowered its benchmark rate by a third to 3 percent last week while the Federal Reserve has reduced its key rate to 1 percent and signaled it's ready to take borrowing costs to the lowest level on record.

The IMF should also expand its role to include financial- market stability, while countries such as Japan, China and major oil-exporting nations need to come up with more money so that the IMF can provide increased financing to countries in need, Ackermann wrote on behalf of the IIF, which represents more than 375 financial companies.

Emerging market countries should also be better represented in international organizations such as the IMF and World Bank, Ackermann said.

To contact the reporter on this story: Aaron Kirchfeld in Frankfurt at akirchfeld@bloomberg.net.

Last Updated: November 11, 2008 11:44 EST