It is unlikely Germany, France or many countries would allow a foreign takeover of their major banks, which raises uncertainty about how far they will allow overseas firms to run payments and other parts of finance, one of the top names in private equity said. “It’s
unlikely Deutsche Bank will be allowed by the German regulators to be bought by somebody that is not German,” said David Rubenstein, co-founder and co-CEO of The Carlyle Group.
“Most countries want to have at least one major bank. I don’t think you’ll see the French regulator allowing one of the major banks bought by a non-French entity,” he said at the World Economic Forum in Davos, Switzerland, on Tuesday. “That nationalist feeling is still going to be around for a while.”
Rubenstein said the rise of big firms in payments and financial infrastructure posed a dilemma on how dominant overseas firms like China’s Alipay will be allowed to be in Europe and the US. “Will American politicians be happy to allow all the payment systems to be run by companies that are based in China?” he asked.
Rubenstein and other members of a panel on the Future of Finance said new technology is transforming the industry in all areas – mostly for the good of customers – but raising questions about cyber security for regulators and politicians. “This is a big political problem going forward,” said Mario Greco, CEO of Zurich Insurance. “Finance wants to be international and yet the political system just doesn’t come close to having the mechanism for dealing with it.”
The increased use of technology will see banks cut jobs and improve efficiency and controls, which Deutsche Bank CEO John Cryan said should see staff “add more value”. “We need to replace a lot of people who are performing the function of a computer. Our mantra is to stop people using their hands and eyes and start using their brains,” said Cryan. He is in the process of cutting 9,000 staff at Deutsche.
But he warned there was a limit to giving too much power to machines, and a human check was needed. “The more complex our algorithms get, the less safe those algorithms are because they are harder to monitor,” he said.
New technologies could see greater disintermediation of banks from areas they have dominated in the past. Kenneth Rogoff, professor or economics and public policy at Harvard University, said that includes the impact of growth in central bank digital currencies in the next 20 years, or even the next five.
“(That) has profound implications for disintermediation of the system, people being able to go to central banks directly rather than through banks to fund themselves,” Rogoff said.
Reuters
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