The global financial world received a huge shakeup Sunday when the co-CEOs of Deutsche Bank, one of the largest financial institutions in the world, announced their resignations. Anshu Jain and Jürgen Fitschen were essentially purged following an emergency meeting by the bank’s board of directors. Jain will be leaving on June 30th, replaced by board member and former United Bank of Scotland (UBS) Chairman,John Cryan, as co-CEO, until Fitschen leaves in May, 2016 in order to achieve a “smooth transition.” Cryan will then remain as the lone CEO. Both Jain and Fitschen have been under massive legal troubles on a multitude of fronts. Regulators and legal authorities have investigated the bank for interest rate manipulation, selling misleading derivatives, tax-evasion, and money laundering. The move follows another emergency meeting by the bank on May 21, in which the co-CEOs proposed a radical restructuring plan that did not impress investors. As Germany’s largest bank, both supporters and opponents of Chancellor Angela Merkel’s governing coalition lauded the move, however some critics feel it is a bit of “too little, too late.”
Although Jain officially stated that the reason for his resignation was that the CEO who implements the proposed restructuring plan will need to remain in the position for at least five years and that he couldn’t fulfill that commitment, it is apparent that his past mistakes caught up to him. Formerly the head of the revenue-generating powerhouse investment banking division, Jain rode his success into the CEO position in 2012. Since then, however, post-financial crisis regulations, and an estimated $2.5 billion in fines and litigation expenses, as well as his desire to shrink the bank’s operations have turned investors off at an alarming rate. Originally hired to boost the Bank’s German performance, Fitschen’s own legal problems is seriously hurting his credibility with investors as well. He is currently defending himself in court from allegations that he misled investigators in a dispute with the heirs of Kirch Media Group. In addition to the legal problems, the bank has been plagued with mounting costs despite multiple efforts to reduce them, including a 5 percent wage increase mandated by the employees’ union. Deutsche Bank employs nearly 50 percent, or about 45,000 of its employees from Germany. The bank’s shakeup is par for the industry, however, as fellow European banks; Barclays, UBS, and Credit Suisse have also turned over leadership since the crisis.
The move has been both lauded and criticized within the German government, with nearly all parties hoping that Cryan makes a clean break from the bank’s former leadership direction. Many, like legislator Hans Michelbach believe that the joint leadership was holding the company back. “A personnel change at the top of Deutsche Bank was overdue to win back credibility and set the bank back on a successful path,” said Carsten Schneider, a Social Democrat lawmaker and supporter of Merkel’s coalition. Opposition lawmaker, Gerhard Schick, concurred, saying “The current bosses were tied too closely to the problems for them to represent a change of corporate culture. This new start should have been done when Josef Ackermann left.” Ackermann was the former CEO who left in 2012. Schick continued, “The decisions back then have led to a couple of lost years for the bank. The new management needs to clean up, particularly in investment banking.” Cryan, who officially begins as a CEO on July 1st, responded to the meeting saying that there was work to be done and that, “Our future will be defined by how well we deliver on strategy, impress clients and reduce complexity.”
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CNN Money – Rich Barbieri
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