Paul Achleitner stood before about 120 media executives and government officials at Sanssouci Palace — the former summer residence near Berlin of Prussian King Frederick the Great — to honor European Central Bank President Mario Draghi for his work to save the euro.
Achleitner, Deutsche Bank AG (DBK)’s supervisory board chairman, was at the M100 Sanssouci Colloquium at the request of the ECB and the organizers of the annual meeting of opinion makers. Achleitner began by praising Draghi’s actions amid Europe’s sovereign debt crisis, Bloomberg Markets magazine will report in its October special issue on the 50 Most Influential people in global finance.
“History books will say he was the right man at the right time in the right job,” he said from the stage at the September 2012 event.
Later in his speech, he issued a polite warning to the guests, including German Finance Minister Wolfgang Schaeuble, about the dangers of regulators who overreach.
“Decisions we take now will influence the development of Europe and Europe’s place in a changing world for the next generation,” he said. “If we overrestrict the functioning of banks and capital markets, we undermine the ability to commit capital to economic activity at a reasonable cost.”
Achleitner, 56, is a leader in the battle against European Commission regulators and German politicians who want banks to separate their securities units from their commercial banking arms to protect taxpayers from another round of bailouts. Since Deutsche Bank hired Achleitner to replace retiring Chairman Clemens Boersig in June 2012, he has met with Schaeuble at least four times, delivered speeches and given interviews to reporters to press his views on regulation.
Investment banking revenue at Frankfurt-based Deutsche Bank, Europe’s biggest investment bank by revenue, rose 1.3 percent to 8.3 billion euros ($11.1 billion) in the first half of this year from the same period in 2012.
Bank executives say a split would hurt revenue by driving up the costs of providing financial products to their clients, who would seek better deals from U.S. banks.
“A country like Germany and a continent like Europe need financial institutions that can compete with the U.S. banks, and Deutsche Bank has the potential to be one of these,” Achleitner says at his office in July. “The key issue we’re facing is to make sure that we’re actually allowed to fulfill that potential.”
Achleitner has stitched together an extensive global network of senior policy makers and executives, says Philip Murphy, who co-led Goldman Sachs Group Inc.’s unit in Germany with Achleitner before serving as the U.S. ambassador to Germany from August 2009 to July of this year.
Achleitner has been a fixture at the World Economic Forum in Davos, attending the gathering of luminaries 17 times. In 2012 at Davos, he discussed the effect of stricter bank regulation on growth as part of a panel with then-Bank of Canada Governor Mark Carney, who became governor of the Bank of England in July; State Bank of India Chairman Pratip Chaudhuri; HSBC Holdings Plc (HSBA) Chairman Douglas Flint; and former Bundesbank President Axel Weber, who took over as UBS AG (UBSN) chairman in May 2012.
The Deutsche Bank chairman, who sits on the Daimler AG board, also leads the Exchange Experts Commission, whose members include Bundesbank board member Andreas Dombret. The commission advises Germany’s Finance Ministry on capital markets policy.
Achleitner’s wife, Ann-Kristin Achleitner, is also well connected to Germany’s corporate honchos. The 47-year-old professor of entrepreneurial finance at the Technical University of Munich sits on the boards of Munich Re, the world’s largest reinsurer by premiums; utility GDF Suez SA; and Metro AG, Germany’s biggest retailer by revenue.
“Many bankers have networks, but Paul’s is profound in terms of the seniority and the trust that people seem to give him,” says Nikhil Srinivasan, group chief investment officer of Italian insurer Assicurazioni Generali SpA (G), who worked for Achleitner at Allianz SE. (ALV) “He had an ability to deal with people — and not just in the German or European context.”
Achleitner, who was born and raised in Austria and who speaks English, French and German, came to the U.S. to study as a visiting fellow at Harvard Business School in 1982 before working as a consultant at Bain & Co. in Boston. He became a fan of the Boston Celtics, who won three National Basketball Association Championships during the 1980s.
Achleitner moved to Goldman Sachs in 1988 and thrived as a dealmaker in New York, London and Frankfurt, rising to co-lead its German unit in 1994. He was one of the key advisers to Germany’s biggest banks, insurers and industrial companies on their sale of shareholdings in one another as part of the dissolution of a system designed to help rebuild Germany after World War II.
Achleitner then jumped to Munich-based Allianz, now Europe’s biggest insurer by market capitalization, in 2000. As the finance chief of Allianz, he oversaw mergers and acquisitions and investments for 12 years before joining Deutsche Bank.
A gifted negotiator, Achleitner wins the trust of others by listening to their views and showing them respect, Murphy says.
“He gets people to think beyond their immediate interests,” he says. “Every merger you see, you have to deal with that situation of people on opposite sides of the table.”
A German newspaper reported in September 2012 that the Social Democrats, the country’s main opposition party, planned to force firms to segregate securities trading from retail and corporate banking if it won the election against Chancellor Angela Merkel’s Christian Democratic Union a year later.
The day after the story broke, Achleitner met with Schaeuble, according to the government’s website. They met again in December and January. Martin Chaudhuri, a spokesman for Schaeuble, declined to say what the two men discussed.
In February, Merkel proposed a milder reform that allows banks to trade securities on behalf of clients under the same roof as retail and corporate banking. Merkel’s plan, which also forces banks to trade for their own account in separately capitalized units, was approved by both houses of parliament by June.
The new law is a partial victory for Deutsche Bank. It said in July that the measure is less far-reaching than the proposal from a group advising the European Commission to force banks to separate much of their trading from deposit-taking businesses.
In August, Peer Steinbrueck, the Social Democratic Party’s challenger to Merkel in the Sept. 22 election, said he will seek a stricter banking law than the one parliament passed.
Inside Deutsche Bank, Achleitner has shaken up the 20-member supervisory board following scandals that involved selling mortgage-backed securities and alleged attempts to rig interbank lending rates. In Germany, management boards are responsible for day-to-day operations of listed companies, and supervisory panels oversee and appoint executives.
Achleitner had inherited a supervisory board that had failed to rein in the recklessness of the bank’s traders before the 2008 financial crisis. Their wrong-way bets led to a net loss of 3.8 billion euros in 2008.
Today, U.S. and European authorities are investigating the bank for its possible involvement in the industry-wide affair in which traders manipulated the London interbank offered rate. Two months into his job as chairman, Achleitner wrote in an e-mail to staff that the firm’s internal investigation showed that a limited number of employees, acting on their own initiative, engaged in conduct that fell short of the bank’s standards.
Executives fired at least seven traders at Deutsche’s investment bank, formerly led by co-CEO Anshu Jain, in connection with attempted rate rigging. Jain isn’t accused of wrongdoing. A Frankfurt labor court ruled today that the bank must reinstate four of the employees as a judge said the company didn’t have processes in place to prevent conflicts of interest when submitting data to calculate rate benchmarks.
In December, about 500 German police and tax investigators raided Deutsche Bank offices in Berlin, Dusseldorf and Frankfurt. Authorities are probing whether bankers evaded taxes in the carbon market.
Deutsche Bank said in December that co-CEO Juergen Fitschen is a subject of the investigation because he signed its tax declarations. The bank says it’s cooperating with authorities and that any errors in those declarations were corrected in a timely manner. Fitschen told the media in December that the allegations against him are groundless.
“Deutsche Bank still has a lot to deal with,” says Klaus Fleischer, a professor of banking and finance at the University of Applied Sciences in Munich. “Achleitner is working through the headline-grabbing problems. He doesn’t try to pat himself on the back but rather pulls strings in the background.”
In May, Achleitner replaced three nonbankers on the supervisory board with John Cryan, a former chief financial officer at UBS; Dina Dublon, an ex-CFO of JPMorgan Chase & Co. (JPM); and Georg Thoma, a partner at law firm Shearman & Sterling LLP. Their job is to help the bank steer clear of compliance breaches and deals involving excessive risk and serious legal issues.
Now, Achleitner, Jain and Fitschen are trying to navigate stiffer capital standards that will cut into the bank’s profit, which totaled almost 2 billion euros in the first half of 2013.
In following the Basel III rules, which the Deutsche Bank executives support, the firm sold almost 3 billion euros worth of shares at the end of April. That helped Deutsche Bank become one of the best-capitalized global firms this year, as measured by equity as a share of risk-weighted assets.
Basel regulators in June voiced support for using a tougher measure known as a leverage ratio — equity as a proportion of total assets — for calculating capital requirements. The change would help prevent banks from undervaluing risk — a danger that exists using the current subjective measure of evaluating assets, says Thomas Hoenig, vice chairman of the U.S. Federal Deposit Insurance Corp., which helps set capital levels.
While Jain has said the leverage ratio proposal is simplistic and might result in reduced lending, he’s moving quickly to comply with stricter standards even though the European Union has yet to require such action. In July, the bank said it would shrink its balance sheet by about 16 percent by 2015, reducing annual pretax profit by 300 million euros.
Achleitner says that leading a bank in 2013 means knowing when to fight regulators and when to change.
“If you’re in banking and finance today and haven’t understood that the landscape has shifted, then you’ve got a problem,” he says.
“This is about understanding that sustainable performance needs to be grounded in social acceptance because otherwise you’re not going to be there for the long term.”