For the big moment, Michael Bloomberg also came to the terrace of the new building last week. The former New York mayor cut the ribbon together with Deutsche Bank boss Christian Sewing and America boss Christiana Riley to symbolize the official opening of the new Deutsche Bank headquarters in Manhattan.
Bloomberg was instrumental in rebuilding the city after the September 11th terrorist attacks, which also hit Deutsche Bank. Now, 20 years later, the move into the new building should also mark a new era.
Riley has been running the business in New York for a good two years and steered the bank first through a major restructuring with the shedding of thousands of jobs and then through the corona crisis. As with other Wall Street houses, Deutsche Bank is now concerned with profiting from the economic upswing and getting as much out of the boom in the capital markets as possible. “We have successfully made the bank smaller and stronger,” said Riley in an interview with the Handelsblatt. The bank “either achieved or exceeded” the goals it had set.
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Around a fifth of the 5,000 bankers from New York have already moved into the new office building, the rest will follow in the coming months. Due to the short notice periods in the USA, the downsizing was already over after six months. The bank parted with the stock trading business, among other things.
According to Riley, the leaner structure is also welcomed by the American regulatory authorities, who have repeatedly criticized the bank over the past few years for its poor risk management and deficits in money laundering prevention and imposed billions in fines on it. “We can now better control the platform we operate here,” she admits. That made the institute more robust, “which in the end also strengthened the regulators’ trust in the bank”.
High demand for green bonds
However, that does not mean that old problems cannot overtake the bank. It was not until May that it received a rebuke from the US Federal Reserve (Fed). In an annual assessment, the Fed complained that Deutsche Bank was lagging behind on the agreed improvements in terms of risk management and compliance, which, according to people familiar with the matter, could lead to fines. Riley didn’t want to comment. When she took office in July 2019, she made improving the relationship with the regulators her most important goal.
On Wednesday, Deutsche Bank presented its figures for the third quarter. Analysts again expect a solid profit for the Frankfurt company. The big US rivals JP Morgan, Goldman Sachs and Co. had recently shown that the boom in mergers and acquisitions was filling the coffers of the advisory banks. The America boss currently also sees growth in the bond business, especially when it comes to the transition to an economy with a neutral carbon footprint.
The topics of ecology, social commitment and ethical corporate management (ecology, social, governance, ESG for short) are currently experiencing a real boom in the financial sector. With so-called ESG-linked bonds, companies can reduce their financing costs if they adhere to certain sustainability goals. When issuing these bonds, Deutsche Bank was able to double its market share in the past two years, says Riley.
The debate about so-called greenwashing allegations at the Deutsche Bank subsidiary DWS has no impact on the business. The former head of sustainability at DWS had accused the fund house of presenting itself as much greener when it comes to classifying assets than is actually the case. The DWS has rejected the allegations, but the US Securities and Exchange Commission is investigating. Riley did not want to comment on whether this is a new setback for Deutsche Bank in the USA. “I focus on Deutsche Bank’s strategy and what we offer our customers. The dialogue with them is incredibly robust, ”she explained.
Too big, too old
As for the move, Deutsche Bank was the last major financial house that still had an address on “real” Wall Street. But the building had become too big and urgently needed to be renovated. The now inaugurated new headquarters in Manhattan’s Midtown office district is closer to the bank’s customers and is entirely geared towards the post-corona era: There are areas on each floor where employees can spontaneously meet to discuss things. “After all, that’s why we’re coming to the office today. We have shown that we can do the quiet, productive work very well from home, ”says Riley.
80 percent of employees in New York can work from home two days a week. Everyone has long since had a laptop that they can work with from anywhere. The bank is thus setting itself apart from large US houses such as JP Morgan and Goldman Sachs, who are insisting that bankers return to the office every day as they did before the pandemic.
As a result, not every banker has a permanent desk in the new Deutsche Bank building. There are 100 workstations for every 150 employees. There are ping pong and pool tables. The large terrace with a view of Central Park has already become the central meeting point.
Like practically all employers in the US, Deutsche Bank is also feeling the effects of a phenomenon known as “the great resignation”. After the pandemic, employees are much more willing to change their jobs. Mobile working and a better work-life balance are therefore in the foreground for many. According to Riley, Deutsche Bank is now able to inspire more people again: This year, the institute received 40 percent more applications for roughly the same number of vacancies than a year earlier.
Waiting for Basel IV
Meanwhile, Riley is watching the planned implementation of the international reform package for banks, known as “Basel IV”, with concern. The package that was agreed upon after the global financial crisis is being implemented accordingly by European and American regulators for their banks. European managers are concerned that the institutes could be at a disadvantage compared to the Wall Street houses.
Riley closely follows developments in the USA and keeps her colleagues at headquarters up to date. “It is a dialogue in which we in Europe are very involved,” she says, “especially when it comes to ensuring that we do not get any further competitive distortions.” The European Union Commissioner, Mairead McGuinness, wants her proposals on Officially introduce Wednesday.
Documents available to the Handelsblatt, however, show that the EU Commission is taking a hard line on important issues. This applies above all to the question relevant to Deutsche Bank of how much the use of internal models should be restricted. The EU Commission wants to introduce these internationally agreed regulations without any major compromises, which could lower Deutsche Bank’s equity ratio. This aspect should play an important role when the figures for the third quarter are presented.
More: Strict rules, long transition periods: This is how the EU Commission wants to implement the banking reform from Basel