Germany’s Finance Minister Wolfgang Schaeuble warned on Friday that a new financial crisis could not be ruled out and said he agreed with the International Monetary Fund’s assessment of banking system risks from “ultra-loose” monetary policy.
Schaeuble, speaking at a news conference to discuss Germany’s leadership of the G20 major economy meetings in 2017, declined to answer direct questions about the health of Deutsche Bank, which is facing a crisis of confidence in the wake of a U.S. demand for $14 billion in fines over its sales of faulty mortgage-backed securities.
But he repeated his sharp criticism of “ultra-loose monetary policy,” which includes the negative interest rates and other unconventional strategies of the European Central Bank aimed at jolting Europe out of extremely weak growth.
“The danger of a new crisis has not completely vanished,” Schaeuble said.
At the IMF’s semi-annual meetings in Washington, Fund officials have said that Deutsche Bank needs to reassess its business model to maintain profits and capital in what is expected to be a long era of low rates that will pressure earnings.
Schaeuble said it was not the place of the IMF and other international institutions to supervise European banks, but added that more voices in the international community were now expressing concern that the risks of ultra-loose monetary policy may outweigh its chances of success.
“If the IMF itself is warning against the consequences of ultra-loose monetary policy, I think it’s a sign of hope that we will take more seriously what the Bank for International Settlements is saying again, again and again,” Schaeuble said.
“That two things together – the global overhang of indebtedness, private, public and company, together with an ultra-loose monetary policy – maybe is one of the risks we will have to tackle even since we have drawn all the lessons of the financial crisis 10 years ago.”
Schaeuble said the G20 finance ministers and central bank governors at a meeting on Thursday night did not discuss Britain’s looming negotiations to leave the European Union, saying that this was a matter between the UK government and the EU.