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Deutsche Bank has long warned that Europe needs strong banks to counteract U.S. and Chinese competitors, but Friday’s speech took on a greater sense of urgency.
“We urgently need to change course here if we do not want to rely primarily on foreign banks to finance Europe’s future,” Sewing said at a banking conference.
“And nobody should take this danger lightly,” he said.
Sewing blamed European regulators for a heavy hand, the latest criticism by top bankers of its supervisors.
“It becomes ever clearer that the current regulatory framework does little to strengthen European banks,” he said.
Sewing praised regulators for stronger supervision that helped the industry after the financial crisis more than a decade ago.
“The issue that concerns me is that the pendulum is about to swing too far,” he said. “We should also look at where (regulation) might have gone too far,” he said.
One area that Sewing singled out with “significant hurdles” erected by regulators is so-called leveraged finance.
European Central Bank supervisors have been telling banks to cut down on leveraged finance where credit is extended to already indebted borrowers.
Sewing said the business was a “legitimate segment that will play an important role in the recovery of the broader economy”.
