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Viewing cable 09FRANKFURT2579, International Regulatory Cooperation top theme at Luncheon

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Reference ID Created Released Classification Origin
09FRANKFURT2579 2009-10-05 12:57 2011-08-24 01:00 UNCLASSIFIED//FOR OFFICIAL USE ONLY Consulate Frankfurt
VZCZCXRO1782
OO RUEHIK
DE RUEHFT #2579/01 2781257
ZNR UUUUU ZZH
O 051257Z OCT 09
FM AMCONSUL FRANKFURT
TO RUEHC/SECSTATE WASHDC IMMEDIATE 1910
INFO RUEATRS/DEPT OF TREASURY WASHDC IMMEDIATE
RUCNMEM/EU MEMBER STATES  IMMEDIATE
RUCNFRG/FRG COLLECTIVE IMMEDIATE
UNCLAS SECTION 01 OF 02 FRANKFURT 002579 
 
DEPARTMENT FOR EUR/AGS 
TREASURY FOR LUKAS KOHLER/OFFICE FOR EUROPE AND EURASIA 
 
SENSITIVE 
SIPDIS 
 
E.O.12958: N/A 
TAGS: EFIN ECON GM
 
SUBJECT: International Regulatory Cooperation top theme at Luncheon 
for Frankfurt Financial Leaders 
 
FRANKFURT 00002579  001.2 OF 002 
 
 
Sensitive but unclassified; not for internet distribution. 
 
 
1.  Summary: (SBU)CG Alford hosted a luncheon at his residence on 
September 16, 2009 for Ambassador Philip Murphy and leaders from the 
Frankfurt financial community. Guests discussed a variety of 
political and financial issues, with a focus on maintaining good 
relations between governments during the financial crisis. Some 
participants requested two main things of the United States: to be 
wary of protectionism during these economically uncertain times; and 
to have another 'Transatlantic Economic Forum' which was held a few 
years ago in Berlin and focused on trade between Germany and the US. 
 End Summary 
 
 
List of Invitees 
---------------- 
(SBU)The luncheon hosted by Consul General Edward A. Alford in honor 
of Ambassador Philip Murphy was attended by: 
 
Johann Berger, Member of the Board of Directors of Helaba state bank 
Hessen-Thuringia; 
Martin Blessing, Chairman of the Board Commerzbank; 
Clemens Boersig, Chairman of the Supervisory Board of Deutsche Bank; 
 
Andreas Dombret, Vice Chairman Europe for Bank of America; 
David Knower, Chief Operating Officer of Cerberus Capital Management 
Germany; 
Nader Maleki, President, International Bankers Forum; 
Konstantin Mettenheimer, Senior Partner of Freshfields Bruckhaus 
Deringer; 
Friedrich von Metzler, Managing Director of Metzler Bank; 
Steffen Sachse, Senior Advisor of the Federal Agency for Financial 
Market Stabilization (SoFFin); 
Hugh Sullivan, Head of Investment Banking Germany, Austria, 
Switzerland Merrill Lynch; 
Jean-Claude Trichet, President of the European Central Bank. 
 
 
High Marks for Crisis Management by Central Banks 
--------------------------------------------- ---- 
2.  (SBU)All members present gave high marks to the rapid and 
determined action taken by central banks during the crisis.  The 
President of the European Central Bank, Jean-Claude Trichet, added 
that he was equally impressed by the decisive and united response of 
political decision makers which he considered unprecedented and a 
testimony to the progress that has been made in international 
cooperation.  He and others claimed, however, that better regulation 
was still needed in order to prevent future crises, and that the 
window of opportunity to make those changes was closing fast. 
 
 
Strong Transatlantic Relationship without Protectionism 
---------------------------- 
3.  (SBU)Participants agreed that the German-American relationship 
was strong.  Mr. Boersig of Deutsche Bank, however, thought that the 
relationship should be continually strengthened by ongoing 
discussions. He specifically requested that the United States and 
Germany hold another "Transatlantic Economic Forum", which was first 
held in Berlin in the fall of 2007.  Organized by the American 
Academy, it included top political and financial leaders from both 
sides of the Atlantic who discussed relevant financial issues 
between our countries. 
 
4.  (SBU)Boersig also noted that the US should be wary of 
protectionism, which is a common reaction for all countries during 
economically difficult times.  Mr. Trichet, of the ECB, echoed this 
sentiment saying that he was gravely concerned that protectionist 
measures would actually endanger the recovery. 
 
 
The Recession in the US is Technically Over 
------------------------------------------- 
5.  (SBU)Asked about his assessment of Bernanke's statement that the 
U.S. recession "is very likely over," Trichet emphasized that 
Bernanke was careful to point out that the recession was only 
technically over.  Although the markets and the media love good 
news, the economic outlook remains uncertain.  The ECB expects 
recovery to be uneven, as stimulus measures currently are buoying 
economic data and it remains to be seen if economic growth will 
remain stable once these measures run out. 
 
6.  (SBU)Trichet went on to point out that though the financial 
crisis has revealed the enormous fragility of the global financial 
system, little progress has been made in stabilizing it.  While both 
 
FRANKFURT 00002579  002.2 OF 002 
 
 
the capital and the money markets are recovering, they have not come 
back to pre-crisis levels.  Boersig added that German banks in 
particular are vulnerable because of the lack of fluidity between 
the three branches of the German banking system (commercial banks, 
state banks, and savings and cooperative banks). 
 
7.  (SBU)Trichet noted that in the Euro zone economic imbalances 
continue to occur, but they are not a reason for concern.  The range 
of deviations between European countries, Trichet said, mirror the 
range of economic variety throughout various parts of the United 
States, whose economic model the ECB had studied thoroughly before 
introducing the Euro.  If anything, Trichet feels that the 
eurosystem has facilitated the management of the crisis. 
 
 
Reducing the Relative Importance of the Banking Sector 
--------------------------------------------- --------- 
8.  (SBU)Eighty percent of European companies depend on banks for 
their financing versus twenty percent of U.S. companies. Mr. 
Boersig, Johann Berger of Helaba Bank, and Martin Blessing of 
Commerzbank agreed that this percentage needs to be lowered and that 
more German companies ought to finance themselves through the 
capital market.  This appears to be happening this year as German 
corporations have issued a record number of corporate bonds (200 
billion Euros) in order to raise money. Furthermore, these bond 
issuances, all agreed, appear not to be prompted by insufficient 
credit availability, but rather by low interest rates and companies' 
increased willingness to take risk. However, the majority of German 
companies are too small to raise money on the capital market. 
 
10.  (SBU)Mr. Blessing stated that in Germany insurance companies 
may also be contributing to a shortage of credit, not just banks, 
because insurance companies collect much of the savings.  These 
companies, however, tend to be risk averse, which leads them to 
invest primarily in sovereign bonds, thereby reducing the flow of 
capital in the market. 
 
 
ALFORD