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German banks remain silent after warning

by Richard Milne in Frankfurt
FINANCIAL TIMES

German banks, locked in a crisis over the fallout from volatile credit markets, have adopted a curious strategy over their increasing image problem: silence.

After the head of a regional bank warned that the situation of German banks was critical as some foreign banks were refusing to lend to them, top executives at other financial institutions have decided to gag themselves.

“Given the situation in the financial markets, the main commercial banks have decided to refrain from commenting in public on the general market situation,” said an e-mail from the head of communications at Dresdner Bank to journalists to explain why its chief executive was cancelling a meeting.

The association of German banks, the BdB, which represents the main commercial institutions, was keen to underline that there was no formal ban on executives speaking out. But an official said: “The banks have said they don’t want to cause any more uncertainty by speaking out.”

Many financial executives were dismayed by the reaction to comments by Alexander Stuhlmann, chief executive of WestLB, warning that German banks were having difficulties getting credit from foreign institutions. “That was a complete mess- up,” said one senior executive.

Other actors in the German financial system are also keeping their own counsel, despite coming under severe pressure to justify their actions. The Bundesbank, the central bank, has said very little since its head called a state-led bail-out of one bank an “isolated” incident in mid-August – only for the rescue of another bank to be necessary days later. Likewise Bafin, the financial regulator, has said little despite criticism of its handling of the situation.

Some German executives complain that this reluctance to speak out hurts the country and its image.

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