In light of the latest grim news from Deutsche Bank (another $3.6bn worth of writedowns bringing the total to more than $10bn for 2008 amid a sharp decline in Q2 profit), interesting timing on the release of the final report of the Institute of International Finance’s committee on market best practices, and the related comment article in Thursday’s FT by Josef Ackermann, chairman of the IIF’s board of directors – oh, and chief of Deutsche Bank.
The report doesn’t really make for essential bedtime reading, but Ackermann’s article may draw an ironic smile from anyone familiar with Deutsche Bank’s slow progression, from a fairly shiny example of a bank that seemed to have dodged much of the credit crunch fallout to one that is looking steadily more perturbed by its exposure to mortgage-backed securities, monolines, commercial real estate investments and falling net revenues.
We’re going to let Dr Ackermann speak for himself. So here are some highlights from his article today:
For the first time in history, a crisis triggered by US housing finance problems is having global ramifications. Individual companies have drawn lessons from the crisis but common efforts to reform the financial system are the order of the day. The challenge is to extend individual reforms across the financial services industry. One step towards this goal is the wide dissemination of the final report of the Institute of International Finance’s committee on market best practices (CMBP).
The report is a blueprint for better management of financial services companies. Given the lax performance in some areas in recent years, this blueprint by the IIF, representing more than 380 financial institutions around the world, is of great significance. The crucial question is: to what extent will the report’s recommendations be implemented?
The turmoil has left its mark and there are compelling reasons for companies to act and to carry out reforms. First, companies need to present a distinct long-term profile to investors, rather than emphasising short-term results. Second, managing complex financial institutions requires raising the bar on risk management, underwriting and disclosure if companies are to prosper in the very competitive global marketplace.
We have stressed that this is not an attempt at self-regulation or an alternative to sound regulation and supervision. Rather, it is a critical exercise in industry self-discipline to complement any changes in regulatory structures that the officials develop. The industry recognises that strengthening practices in many areas is now essential to rebuild confidence in the global banking system and make markets more efficient.
