Interview
Chairman of the Management Board, Dr. Wolf Schumacher in interview with Wiesbadener Kurier, issue 12.11.2011
"The economy needs strong banks"
INTERVIEW - Aareal Bank boss Wolf Schumacher calls for reliability
WIESBADEN. The sovereign debt crisis and more stringent regulations for the finance sector are keeping Aareal Bank, the stock-exchange-listed property financer, on tenterhooks. In an interview, the chairman of the Board Wolf Schumacher called for more reliability from politicians.
Mr Schumacher, how do you see the way the politicians are managing this crisis?
It is in the nature of things that politicians cannot react as fast as the financial markets, we have to live with that. But what I would like from them is a steady framework for our business decisions. When you get up in the morning, things look round but by noon they are triangular and in the evening they are square. You cannot run a company sensibly if the goalposts are shifting all the time.
What does the planned regulation of the financial markets mean for the banks?
We haven't got anything against regulation that stabilises the system so as to forestall crises. But you have to proceed with a sense of proportion. Otherwise, the banks will not be able to service the economy and citizens to the degree that they actually would like and should. An economy needs strong banks to ensure the financing of investments in growth and the future. For example, Aareal Bank often finances hotels, and the jobs there, from management to porter, depend on it.
What has to happen in the debtor states of the Eurozone?
The countries have to repair their government finances sustainably. That begins with trivial things: for example, how can Greece collects its taxes effectively? On top of that, the decisive question is: how can economic growth get under way again? Greece needs its own, exportable products for that. We generally need a type of Marshall Plan for the countries currently in the debt trap because growth is the key to long-term recovery.
There are often calls for Greece to leave the Eurozone: is that a conceivable solution?
That would be the wrong way, I think. Because how is Greece to buy commodities such as crude oil on the world markets with a drastically-devaluated currency? That would mean disaster for the country and would trigger unforeseeable consequences for the other Euro countries. The Eurozone has to stand by the countries that it accepted.
In concrete terms, what would Greece’s exit from the Eurozone mean for the financial markets?
I really do not want to think about that scenario. That exit could set off a negative domino effect with enormous knock-on effects, and for the bank sector too. And in the worst case, the Eurozone would erode further after Greece left it. Allow me to make a comment pro domo: Aareal Bank has no exposures in Greece. But after Greece leaving and given the probable speculation about the next shaky candidate, that would prevent less stability than ever in the finance market. Capital is like a timid fawn, it bolts at the first opportunity. And then even less would be invested in Europe.
Is Aareal Bank also parking short-term funds at the European Central Bank?
Currently and like a lot of other banks we are depositing money with the ECB for safety reasons and we receive relatively low interest on it.
In terms of regulating the social market economy as it exists in Germany, that makes no sense. The more I paralyse government finances and the more I rein in the banks, the more money for investing is withdrawn from the business cycle.
How does the crisis look for Aareal Bank?
We have been seeing extreme market fluctuations for some time now. The high volatility on the stock market, which incidentally is making the Aareal Bank share fluctuate strongly in spite of our on-going good business trend, is the most evident proof of this. The risks in the financial system have increased to an extreme extent overall. In addition, the fears of a more anaemic trend in the global economy are increasing. If the financial markets infected the real economy, that would worsen the crisis exponentially.
Are you seeing a flight to real assets?
Many private individuals and many professional investors are shifting their assets at least partially into property, which does not fluctuate so much. From my standpoint that is not a bad trend. Because living in your own four walls is one of the best securities for retirement.
What is the outlook for Aareal Bank?
We have a sound strategy and in the last few years we have demonstrated that we can cope with difficult market situations too. So I am not afraid for our bank. Incidentally, the underlying trends in the property sector are in favour of Aareal Bank being successful over the long term as a real estate financer. For as long as there are people on this earth, we are going to need buildings for them.
What trends are apparent?
The energy efficiency of buildings has to be improved urgently. At the same time, there is a renaissance for existing properties in the conurbations because you cannot keep on concreting the greenfields. On top of that, demographic change is going to alter the way people live and shop. All that needs investments and we are the financing partners.
Criticism of banks is a popular sport at present. What does that mean for Aareal Bank?
Criticism is legitimate but in some cases it is quite exaggerated. For example, the current crisis is first and foremost one that was caused by governments and not by banks. Banks have certainly made mistakes in the past but they learned from them. We can't condemn a sector across the board over the long term; we urgently need an objective public debate. After all, 670,000 people work in the finance sector across Germany. In view of this negative image, young people could find it increasingly unattractive to work in the finance sector. But we need good up and coming talent in future too.
Isn't the finance sector to blame too?
The problematic thing is that outside the finance industry hardly anyone understands it. Unfortunately, in the past we were not able to explain for all to see why we need banks in an economy. The gap between politics, banks and society is now as wide as the Grand Canyon. All those concerned now have to face up to the challenge of building bridges of understanding.
The interview was conducted by Christina Eickhorn, Ida Rether, Stefan Schröder and Karl Schlieker.
Wiesbadener Kurier - issue 12/11/2011