October 10, 2019

Breakingviews: Deutsche Bank’s new director isn’t worth the fuss

by Breakingviews.

Studying the board members of Europe’s major banks is a chastening education in the continent’s incestuous financial elite. Shareholders and regulators largely tolerate the criss-crossing careers and responsibilities of directors because it’s hard to find experienced candidates untainted by theoretical conflicts of interest. Still, Deutsche Bank’s latest appointee is in a category of his own.

The 13 billion euro lender in August nominated Juerg Zeltner to join its supervisory board. The 52-year-old has lots of relevant experience. He worked at UBS for 30 years, most recently leading its giant wealth management division. In May he was named chief executive of Luxembourg-based wealth manager KBL European Private Bankers, which is backed by the ruling family of Qatar, also a major Deutsche investor. The bank’s supervisors, BaFin of Germany and the European Central Bank, think the two roles overlap too much, the Financial Times reported on Wednesday.

It’s easy to see why. ECB guidelines for bank executives or board members state that a “significant commercial relationship” or a “substantial financial interest in” a competitor could count as a material conflict of interest. Zeltner is both the CEO and a significant investor in KBL, which has 73 billion euros of assets under management and operates across Deutsche’s core European markets. It is targeting broadly the same type of clients as the German group’s larger private banking business, including high-net-worth individuals and family offices. That could clash with Deutsche’s ambition of expanding its share of the wealth management market both in Germany and abroad.

There’s also the question of time. The ECB generally frowns on board members holding too many directorships. Though they stop short of positing a specific limit, the body’s guidelines make clear that executive roles merit an outsized weighting when considering whether a director can devote the necessary attention to another job.

It’s easy to see how Deutsche Chairman Paul Achleitner got himself into this situation. The lender’s recent troubles highlight the need for tough and experienced directors, but also scare off potential candidates. A formal thumbs down from regulators would be humiliating, though. Better to withdraw Zeltner now. Despite his experience and skills, he’s not worth the fuss.

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