The Deutsche Bank Downfall How a Pillar of German Banking Lost Its Way
For most of its 146 years, Deutsche Bank was the embodiment of German values: reliable and safe. Now, the once-proud institution is facing the abyss. SPIEGEL tells the story of how Deutsche's 1990s rush to join the world banking elite paved the way for its own downfall.Greed, provincialism, cowardice, unfocused aggression, mania, egoism, immaturity, mendacity, incompetence, weakness, pride, blundering, decadence, arrogance, a need for admiration, naiveté: If you are looking for words that explain the fall of Deutsche Bank, you can choose freely and justifiably from among the above list.The bank, 146 years after its founding, has become the target for all manner of pejoratives, and not just from outside observers. All of the above terms were used in interviews held during months of reporting into the causes of the downfall of Germany's largest financial institution. They popped up over the course of several hours of interviews with four Deutsche Bank CEOs, three former and one current. And they were uttered in interviews with eight additional senior bank managers and board members conducted over the course of several years, from the 1990s until today, and in meetings with captains of industry who know the bank well and during encounters with major stakeholders. More than anything, the disparaging words come up frequently in interviews with those who have worked or still work at the bank as customer service advisors, as branch managers or in positions lower down on the food chain.
What we have found in the course of these myriad interviews -- combined with the hours spent analyzing bank balance sheets, thousands of pages of files, committee meeting minutes and archive material -- is that the collapse of Deutsche Bank is the result of years, decades, of failed leadership, culminating in the complete loss of control of the company by top managers during the period between 1994 and 2012.
It is a story about how Hilmar Kopper, Rolf E. Breuer and Josef Ackermann, the leaders of Deutsche Bank during those fateful years, essentially turned over the bank to a hastily assembled group of Anglo-American investment bankers before Anshu Jain, the prince of these traders, rose to the top and spent three more years sailing the bank full-speed-ahead into the shoals.
It is also a story of how these bank heads, along with numerous other members of the management and supervisory boards, stood aside as Jain and the many other new investment banking heroes modified the staid German financial institution to serve their own purposes -- essentially looting it and robbing it of its very soul -- without leaving behind a better, stronger bank.
The subject is vast and convoluted, given the many aspects and paradoxes that come with the decline of such a large financial institution. One of those is the fact that, even as Deutsche Bank is rapidly losing value, it is still seen today as the largest systemic risk for the global finance world. Every detail in the sequence of its decline is controversial, partially because the financial world still considers it normal that nobody take responsibility for anything but themselves. All of them are most concerned with painting their own role in the best light possible and presenting the decisions they made as the only ones possible at the time.
But their claims must be examined critically. When looking back at past decisions, one can easily seem like a know-it-all, but it's just as inappropriate to fall prey to historical relativism. When a bank like Deutsche, once an icon of respectability and solidity, transforms into a caricature of "The Wolf of Wall Street," something must have gone wrong and someone must have been responsible.
And there are people who deserve blame: management board spokesmen (the bank's equivalent to a CEO before a true CEO leadership model was introduced in the 2000s), members of senior management and advisory board members over the course of several years. Their leadership failures were not primarily the result of professional incompetence, since the people involved were and are extremely well educated, often proven professionals with significant amounts of experience. The source of their mistakes lies elsewhere, in cultural factors and psychological disposition.
The German-ness of Deutsche Bank also had a significant role to play over the years. It looks as though Deutsche Bank managers wanted to free themselves from Germany's reputation for provincialism -- and went so overboard the consequences can still be felt today. Because once they successfully managed to expunge everything that was German about the bank, it suddenly seemed helpless and empty, aimless and confused.
Deutsche Bank is broken. It might be able to extract itself from the 7,800 lawsuits it is currently involved in, or it may shrink to the point that it will no longer pose a systemic risk, or it may manage to find investors to help it scrape together sufficient capital to fulfill legal requirements. In the most extreme case, it may even be bailed out by the German state. But it is broken nonetheless when compared to that which it once was: a brand, a symbol, a German icon....MUCH MORE
HT: Longform
I was just told that FT Alphaville's Further Reading post dropped out of the feedreader first.
I was just told that FT Alphaville's Further Reading post dropped out of the feedreader first.