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Deutsche Bank Says U.S. Costs Will Rise on Capital Rules

Deutsche Bank AG Co-Chief Executive Juergen Fitschen
Deutsche Bank AG co-Chief Executive Juergen Fitschen said, “We’re not against local incorporation, but we have a preference to make the most effective use of our capital.” Photographer: Hannelore Foerster/Bloomberg

Deutsche Bank AG’s cost of doing business in the U.S. would rise should regulators implement suggested capital rules for foreign lenders, said Juergen Fitschen, the company’s co-Chief Executive Officer.

“It hinders us from using the capital base as efficiently as we would do,” Fitschen, 64, said in a speech to students in the western German town of Vallendar today. “It makes our participation in a foreign market more expensive.”

The Federal Reserve last month proposed subjecting two dozen foreign banks with at least $50 billion of global assets to stricter capital rules to help lower risks to the financial system. That would limit the ability of non-U.S. banks to compete and could lead to a spiral of regulators implementing protectionist measures, Fitschen said.

“We’re not against local incorporation, but we have a preference to make the most effective use of our capital,” Fitschen said. “That’s the one concern that bothers us a lot in addition to wanting level playing field conditions.”

Chief Financial Officer Stefan Krause said in December that Deutsche Bank looked on the new capital rules with “quite some concern,” though couldn’t yet tell what the consequences for its business would be.

Deutsche Bank, based in Frankfurt, and London-based Barclays Plc would be among the institutions that would have to keep more easy-to-sell assets in the U.S. and face restrictions on distributing capital to parent companies. The Fed provided $538 billion of emergency loans to the U.S. units of European banks during the financial crisis, almost as much as it did to domestic firms. That increased political pressure on lawmakers and regulators to tighten rules for all lenders.

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