FRANKFURT Oct 1 The head of Germany's financial
regulator warned on Saturday of negative perceptions that could
lead to downward spirals on the markets, at the end of a week
that saw Deutsche Bank shares battered by a crisis of
In an interview with the Frankfurter Allgemeine
Sonntagszeitung newspaper due to be published on Sunday, the
head of Bafin, Felix Hufeld, declined to comment specifically on
Deutsche Bank, Germany's biggest bank.
But he said: "I warn people not to let themselves be drawn
into a kind of downward spiral of negative perception. Not every
nervous market reaction is backed by objective facts."
Deutsche Bank shares were hit first by a demand for up to
$14 billion from the U.S. Department of Justice for mis-selling
mortgage-backed securities, then a report that Berlin was
preparing a rescue plan and lastly on Friday by a report that
hedge funds were reducing their exposure.
They recovered from record lows on Friday after another
report late in the day that the bank was close to a settlement
of $5.4 billion with U.S. authorities instead of $14 billion.
Hufeld said it was correct that there were rescue and
wind-down plans for every large bank, without elaborating.
He blamed the low interest-rate environment for eating away
the banks' profitability but said the institutions needed to
react fast. "Painful cuts will be unavoidable," he said.
Hufeld said he expected several mergers in the German
banking sector, mainly between the smaller cooperative and
He did not name Deutsche Bank or Germany's second-biggest
bank, Commerzbank, but said he did not believe in a
"cure-all miracle merger" that would solve all Germany's banking
(Reporting by Georgina Prodhan; Editing by Helen Popper)