it losses as saudi arabia signals it may compromise with iran. we are live at the opec meeting. ilife.he bank sells ab its ceo was reported to have ruled out government support. we hear from the deputy governor of the bank of england at the bloomberg markets most influential summit live on "the pulse." welcome to a special edition of "the pulse" live from london. ourcine lacqua is hosting
most influential summit taking place right here in our european headquarters. we are about to hear from the deputy government at the bank of england. but first, here is the bloomberg first word news. ted losses on signs saudi arabia may compromise with iran. the countries oil minister gave the strongest indication the kingdom could reach a deal in november. u.s. government data is forecast to show inventories increased by 3 million barrels. deutsche bank shares are trading high after it agreed to sell its u.k. insurance unit to phoenix group. the ceo has told the newspaper that " capital is currently not an issue. and accepting government support is out of the question for us." the government has come under
increased pressure. payl bank of scotland will claims iton to settle sold faulty mortgage backed securities to u.s. credit unions. the agreement closes lawsuits filed on the half of two credit unions. rbs has not admitted fault and says the cost is covered by provisions. two senior partners at goldman sachs in asia are said to be a discussion about leaving the bank. asia pacific investment banking solutions head is planning to depart the bank after 15 years. and michael smith is also in talks about leaving. a spokesman for goldman sachs declined to comment. the former israeli president died.perez has he was the architect of israel's defense establishment that involved into a tireless
advocate for peace. he suffered a stroke two weeks ago. the nobel peace prize laureate was the last surviving link to the country's founders. he held all of israel's top civilian posts. a day news 24 hours powered by 2600 journalists and analysts in more than 120 countries. before we go live to that keynote speech from the bank of england's deputy minister, let's check in on markets. we've got european stocks rising stoxx 600. if we look, it is commodity producers that are leaving the rebound and european stocks. also helping them erase a monthly decline are yesterday we got the better than expected u.s. consumer confidence of data. helping shares halt a two day sell of. nymex up. we will talk a lot more about
oil later in the show with that informal opec meeting happening today. .02% asindex up 0 investors are waiting report on durable goods. finally, wanted to show you the 10-year jgb yields. down 10 basis points. trading starting to close up there but that yield has actually fallen to a moone month low. a different picture in europe then we saw in asia. as i say, seeing that rebound in europe. some of the banks higher as well. we were just talking about deutsche bank. so, those are your markets for -- we will have a lot more on markets, on oil and on banks later, but for now, let's cross live to bloomberg markets most influential summit. the deputy governor of the bank of england is getting ready to
speak. --t is john nichols micklethwait. we've got so many guests for you at this event in london. a lot to look forward to. i cannot wait. here we go. audio] nejra: just waiting. we'll come back when we have audio. a few technical problems but not to worry. i assure you it will be worth waiting for us we will have the deputy governor not just at the event in bloomberg but also speaking to francine lacqua, who is not in this seat today, but don't worry, she will be back tomorrow. we have got the audio back. thanks for your patience. >> for aligning with us to bring
you today's program. i you look back at 2016, think we can all agree it is one of those years that has changed a lot. you have the people of britain voting for better or worse to exit the european union. you have the world's central banks steering monetary policy terr harted itory. we have a constitutional referendum in italy coming up. and leicester halfway to winning the champions league. taking the stage are representatives from the commodities and technologies industry and of course finance. these people are making daily decisions about what matters and what affects the lives of pretty much everybody everywhere. on that note, i'm especially pleased to introduce our first
speaker. a she is a respected international economist, currently serving as what is the deputy governors of the bank of englandwhere she helped shape policy decisions and been part of britain's response to that brexit. she recently announced sadly she is leaving to go and become director of london school of economics where we wish her every success. one ofs angelie jolie as her professors. here to deliver her outlook for monetary policy, please welcome the bank of england's deputy governor minouche shafik. >> thank you, john. wow. thank you,john, for that welcome. londoni move to the school of economics, i have a very long to do list. on that list, i have to complete
the purchase of 60 billion gilts. we just started purchasing corp. response yesterday. and we have got to draw up a blueprint for the future of the high-value payment system. all the things on my to do list have one thing in common, which is the growing role of central banks and financial markets and in the economy since the crisis. and that's the theme of my remarks this morning. it's clear that central banks are bigger than ever before. gone is the pre-crisis ideal of a minimal central-bank with a small balance sheet and narrowly defined mandate and a narrow set of tools and a bias towards nonintervention. central banks have greater responsibility at a wider range of tools. they are also bigger. central bank balance sheets are bigger than ever and have continued to increase in size since the crisis.
this gives you a sense of how the major central banks share of gdp has grown to. what a would like to do this morning is use my remarks to reflect on this bigger footprint of central banks, using the bank of england's recent experience as an example. i'm going to focus on four themes. my first theme is that the broadening of our responsibilities and the range of tools has facilitated a more joined up approach to policymaking. and how we set monetary and financial stability policy. i'll illustrate that by using the contingency planning that we did in the run-up to the referendum. ey second theme will be th increase in size of our balance sheet has been a necessity of our time. the times we live in. the fact that i deep, structural forces that have continued to combine to depress the level of interest rates at which the economy would be in equilibrium, obliging us to re monetary
policiesly on. our impact on the financial system, the central banks footprint is larger. theme is that we are aware that some of our policies have spillovers but we take steps to to address them wherever feasible within our mandate. we know the bigger footprint means we have to be mindful of where we step. and finally, i'll talk about the fact that our bigger footprint means that there are some things the central bank cannot do. sustainable, strong growth over the medium-term, monetary and financial stability policy must be part of a balanced package that also includes economic policies and given strong global interconnection, international policy coordination. the issue ofwith
joint of contingency planning and the contingency planning we did in the u.k. in the run-up to the referendum. we started from a a position of strength thanks to the changes that have been made since the financial crisis. the monetary policy committee, the financial policy committee met to exchange views on the risks arising from the referendum. also considera 30 the implications for the stability of the system -- the regulatory committee also consider the implications. tandem to ensure that banks had the liquidity they needed and their needs can be met. and we reached out to all of our international partners to make sure that we would percent a coordinated response whatever the result of the vote -- we a coordinated response. i'm sure everyone in this room can tell similar stories of contingency planning in firms across the u.k. and internationally. and in part because of this careful planning by all of us,
the day after the referendum was remarkably orderly. like many of you i arrived in the dealing room in very early hours of the 24th of june to witness astoundingly large science in the foreign exchange market. operating in a remarkably stable fashion as sterling found its new level. many banks and trading platforms reported volumes that were 10 times typical daily amounts. went throughyou, i a series of prescheduled conference calls with market participants, international calm atmosphere as the immediate risks we had feared thankfully did not materialize. responsibility of the bank of england for our market operations, 16 story i wanted to draw particular attention to is the resilience of banks liquidity positions in the aftermath of the referendum. thehe period since
financial crisis, banks have increased their liquid asset buffers fourfold and they have also increased fourfold the lender -- you of collateral they have pre-positioned with us at the bank of england for us in our liquidity facilities. we have made much of these facilities and how they have been overhauled since the crisis , and how we provided access to a broader range of counterparts against a much wider range of collateral. but the truth is that this was the first time these facilities had truly been put to the test. and the flexibility that we were able to show by increasing the frequency of our regular operations and auctions gave reassurance to banks that wthey could rely on us. our ability to send a message to the public on the day of the referendum that we stood ready to lend more than 250 billion pounds to the banking system headed off concern about the health of our banks. and the fact that those facilities were actually used in
moderate size proved that they were an effective form of insurance. over the month of june banks borrowed 9 million pounds from us in exchange for pre-positioned collateral as they maintained high levels of liquidity just around the referendum results. clear that became the immediate financial stability risks had either not materialize or had been effectively mitigated, our attention turned to monetary policy into the economy. now, in setting monetary policy after the referendum result, we faced to challenges. first was that there was very little data on which to base an assessment on how the outlook changed. the second was that we started from a very unusual initial position with bank rates being extremely low already. i'll take each of those challenges in turn. first, although we had very little hard economic data covering the period since the referendum, we did have some
forward-looking surveys and leading indicators of gdp growth. those leading indicators are of varying quality. some had high predictive content of gdp, others very little. so it can be very difficult to know which signals and take. now, one simple way of organizing this is this rate -- that was the deputy governor at the bank of human speaking of bloomberg markets most influential summit happening in the building today. we will return to this around 9:30, when she will take part in a q&a session with bloomberg. to bloomberg for plenty more big interviews from our markets most influential event. the credituests are suisse ceo and the former deutsche bank co-ceo and tony ressler. from one central bank into another we have got some headlines crossing the bloomberg from mario draghi speaking in frankfurt bringing up two
buzzwords, saying the lower equilibrium rate caused the ecb to adopts negative rates saying structural reform is needed to liberate from the low rebound and we need more robust fiscal policy perceptions. that's from mario draghi in frank for it right now. saudis signal they are open to a deal with iran. this is bloomberg. ♪
halting losses ahead of an informal meeting of opec members. >> three countries have had special conditions, namely libya, nigeria and iran that have been constrained for the respective reasons. will be permitted according to the terms to produce at maximum levels that make sense and generally they would be the levels that they have achieved recently. this, then agree to a freeze will take place. our bloomberg middle east anchor is in algiers.
take us through this. we may not see a deal today b ut momentum seems to be building towards one. >> it is, yes. that is what we are hearing on the ground. saudi arabia has been leading the charge to find common ground. you just heard from the saudi oil minister. it is a difficult task because the supply side of the equation has increased. roldman sachs has slashed thei forecast to $43 a barrel. oof of urgency, we are feeling it on the ground. the meeting is set to start at 3:00 p.m. local time. we've just doorstep the norwegian petroleum minister and he said opec had previously been able to rebalance the markets when it needed to and that role is very important for the industry. a lot of stakeholders have been saying over the last 48 hours that the risk is there will be an under investment in
infrastructure and this is going to haunt the world again in two or three years' time. we're currently waiting to hear opec players.the all comes down to saudi arabia if they can make progress on their differences, there will be a long way forward. nejra: as you say, all coming down to saudi arabia and iran. so, what exactly are iran's demands? ian position iran has always been to recapture pre-sections output. that is not new. that theyeen new is are saying you have not seen any proportions from saudi arabia which goes against what we have been hearing from the other on completing their goals. they are also saying they want 12.7% market share. they currently have 10.7. this is pretty much a zero sum
game. if you take two percentage points out of the market, it has to come from somewhere. is saudi arabia willing to give that to iran, or other members willing to compromise as well? there is a sense of exceptionalism. a lot of members feel why should cut? we have got our own challenges. these are tough times. the road ahead definitely a tough one but, once again, citigroup analyst to not think it is likely something will come out of it, but there is always the off chance that saudi arabia and iran find common ground in the interest of the group as a whole. after all, their credibility is at stake. nejra: we are on tenterhooks in the me time. thank you so much. up next, european stocks rise as deutsche bank advances. we bring you the mornings moves. this is bloomberg. ♪
nejra: you are watching "the pulse" let's check on the markets. very different. picture. we saw losses in asian equities but europe is up, the stoxx 600 up 1.1%. every industry group actually up on europe's equity benchmark. it's media companies now. overall seeing the stoxx 600 gaining. helping erase a monthly decline. we are keeping a close eye on
oil. wti and brent have both halted losses. 44.86. this after saudi arabia signaled it may compromise with iran on a future output agreement. that does not necessarily mean we are going to get an agreement today. i just wanted to show the %loomberg dollar index, up .2 after consumer confidence data ahead of durable goods orders today. we have got a 10-year jgb yield down to basis points. it has hit a one-month low today. up next, we bring you a conversation with minouche safic, the deputy governor at the bank of england. at bloomberg markets most influential summit happening in the london building. today, a very exciting day with a lot of great speakers on the roster. we look forward to it.
nejra: welcome to a special edition of "the pulse" live from london. francine lacquaerg markets most influential summit taking place right here in our european headquarters. we are going to go to that event now. with bloomberg's editor in chief speaking to deputy governor for banking and markets at the bank of england minouche safik. listen in. 2-3 gdp by then and we will have labor market data which will tell us about wage pressures.
and we will have to assess what that data tells us and whether that merits actions before or not. john: you would not say where you would vote now? >> never. john: the one thing you have said very often is the thing you look at particularly is wage growth rather than particularly inflation. two things. i wondered on that magnificent radar you showed us. wage growth is at the very center of it and whether that is the key determinant for you. >> wage growth is key because it is the most important domestic driver of inflation. we actually expect inflation to 1% by the ende to of this you because of what happened to sterling. backe expect it to get to 2% by the middle of next year. so, sterling at the moment is playing a very important role in the path of inflation. but of course that will work its way through prices over time. so, the deep underlying driver
will be wage growth. i personally am of the view that we have to look through some of the effective sterling waylet that work its through and ultimately the most important medium term structural driver of inflation is going to be wage growth. and wage growth has been quite muted. john: we could end up with a system where inflation is up 2%, wage growth much lower, and that would be a reason to keep rates where they are. >> yes. john: thank you. on amber not red, you defended very eloquently the position not, what you did after brexit. do you still think that in some ways the kind of most economists over exaggerated what would happen with brexit? did we all get it wrong? wouldl, i think, first, i say i would much rather be on the front foot and act preemptively rather than be on o little foot and do to
too late. i think the monetary policy did the right thing. i also think that what we did help to mitigate the negative shock of the immediate aftermath of the referendum. agents went in and part of the reason we are seeing consumption up is because rates are lower, mortgages are less expensive and people can sustain levels of consumption. we have to also recognize and i think the radar illustrates how the data moves around. and while the current data that we have seen in the immediate aftermath of the referendum has been more favorable, the forward-looking indicators, particularly things around investment in tension, still look quite worrying. so, i do not think the uncertainty is anywhere near over. and i think it is too early to -- john: can you give us any idea -- the center of your radar -- you imply that wage growth and
investment positions are somewhere in there. what are the other things which are key in the middle? >> the indicators are ones that have a very high correlation with gdp. the center of the rater has a inrelation in 2.7 and above terms of gdp. those are a range of indicators from things like business parameters, calculated buyers on the banks to indices of services and production. a variety of measures of output that are -- some of which are current and some forward-looking. there is not one particular pattern, one type of data that tends to have high verdict of confidence. i think that is the value of these kinds of exercises. you have to look at a wide range of data. john: what about this hammond's boost, this fiscal push? back in the old days, alistair
darling pushed in 20 billion pounds roughly. now the talk is 5-10 billion. is that enough? or is it yet another example of what you talked about, everyone keeps on relying on central banks to do most of the work? >> i mean, i don't know what the treasury is planning. i am sure they will share it with us at the appropriate time. it's too early to say whether will be enough for not. i do think there is a wider, more international issue around the balance he of monetary fiscal and structural policy. every international meeting i have been to in the last year has ended with the same conclusion which is that we need a more balanced approach to recovery and that includes a balance of monetary policy, fiscal policy, and structural reform with a big if this is on the structural side as well as fiscal. john: in britain, do you think
structural -- most people are looking at the economy is a structurally it doesn't. face the same challenges as the eurozone is structural less of an issue here? >> there are, it is less of an issue than many other countries. the u.k. economy is quite flexible relative. our label markets are very flexible. our regulatory framework is more flexible but there are still structural issues in the u.k. the fact we have had so little productivity growth is indicative of the fact that we still face structural reform challenges. john: back to the fiscal side, theour view generally british government, they have done enough on the fiscal side? to operate inhave a way that we take fiscal as given. and we adjust -- >> you take their
underperformance as a given? >> you said that. [laughs] act within can only our mandate and we can only, we have to let fiscal policy is a political process that has to p lay out. and we take that as given and tried to deliver the inflation target with what ever fiscal we are given. do exactly that. john: you talked about the numbers in the period, the third quarter and so on, next year the economists are still forecasting .8% growth. that looks a little bit sluggish compared to where we are now. do you think -- do you expect that to be revised? >> we will do a full remission of our forecast in november. i don't want to preempt that. we have already revised a little bit. in august, we expected 2-3 gdp to grow at .1. that's till half the rate of
growth we were seeing earlier in the half in 2016. so, it's still less. i think the revision we will see, in august we expected quite as sharp short, v-shaped shock t o the u.k. economy. i think revisions will start to look more u-shaped with a slower and less abrupt. john: do you see brexit was one of those things which we'll start it would have an acute affect, infected could be chronic, longer-term. >> yes. tohink the impact is going be longer-term because i think everyone has realized that the process is going to be longer-term. and it is going to take quite a long time to agree on the end satate. -- state. john: do you see any positive impact of brexit? the weather has been really good --
[laughs] john: right. the world behould about deutsche bank? you are also on the regulatory side. that is what the markets are worried about this week. you have got u.k. exposure to it. >> deutsche bank operates a branch of the u.k. it does not come under the direct regulatory supervision of the prudential regulatory authority supervised by the ecb. clearly we work closely with them to monitor what is happening. banks at thee many moment, they are trading below book value. there are some transitory aspects to that to do with conduct fines. and there are some longer-term issues around modeling, which i think many banks are facing. a lot of challenges to their business model. it isn't as profitable as it
used to be. there are many challenges from coreech world, the business of banks. many banks are struggling with transforming the business models. and we will see how that plays out. the: just looking at one of charts you had where you look at the banks profitability, there is a complaint from the banking industry they have not been allowed to make enough money to be able to build up those buff ers which you and many others want to do. >> first, i should say many of them have built up significant buffers. and the other thing i would say is that u.k. retail banking is highly profitable. ad so, the banks that have strong franchise are doing very well. i think the area that is less profitable at the moment is the investment banking area. do again, some of that is to
with regulatory changes but some of it, a lot of it is to do with structural changes in those markets around electronic fixation -- electronic ification, increase competition. this is what the market does. it competes and the more efficient once survive -- surviveo. john: banks have gotten more boring. >> boring can be beautiful but much morehave gotten competitive. there are many new players and competitors for banks. i am sure some of them will even and compete and get better as a result of that competition. john: deutsche bank, we talked about the new lehman. you do not see any direct comparison? >> no. john: the thing you talked about a great deal was q.e. when you came in, all the talk was that you were here to help unwind q.e.
that hasn't happened. the number of instruments has grown enormously. the people who seem to be furthest ahead on this are the bank of japan. this idea about being able to set the long term rate, does that make sense to you? >> yes. i think the bank of japan is further along because they face a different set of problems than we do. two things in their recent announcement. one, they said they were willing to over shirt their targets. their targets and they were going to try to tilt the shape of the yield curve. in the u.k., long-term yields are not where they are in japan. 10-year jgb's are at negative yields. and gilts are not, 10-year gilts are not.
our yields are still quite positive. so, i don't think we need to be go where the bank of japan have gone. we will watch what happens to them. john: do think it is possible to do what they are trying to do? to tilt the yield curve they are trying to do? >> they have shown a willingness to expand their balance sheet to incredibly large levels. over 80% percent japanese gdp. i do think it is possible. i think the question will be whether it will have the economic effects they desire in terms of changing inflationary expectations and changing the fundamental drivers of inflation in japan, and wages. john: mark carney has come out saying he is not a fan. do you see any arguments in their favor? >> well, i think the only arguments in their favor are if you have no other option. i would never say never but i
a lot of there are other places i would prefer to go before i went to negative. the package we announced in august showed we have a wide array of tools we can still use if we needed further stimulus and we have got room to go on all of them, be it bank rates, corporate bonds or gilts. john: you talked honestly at the end you are concerned about the long-term impact of q.e. and all the different things that come with that. you originally came in to unwind all of these things. how does the unwinding work? how does that happen? where should we look to see who is able to do that best? >> i think the unwinding will start when interest rates are at a level where we could, if we needed to stimulate, could go further. so, we signaled we would not think about unwinding till bank rates was somewhere in the
region of 2%. you can see why. you want to have somewhere to go in terms of room to maneuver in the future. so, on the current yield curve, we do not get to 2% for quite a while. but i think once we got there, for gilts, i think we would probably have a pre-announced, orderly phasing out of the gilt program. wt the moment, there is a vie you can just let it run off. that is a little bit lumpy. if you wanted to have an orderly, we would do this if we wanted to tighten, so you would do it in an orderly fashion so you could tighten in an orderly way. i think that's the way we would do it. i suspect that, as you said, i was brought in to try to figure out how to phase out q.e. we do have a plan but i suspect i will not put that plan into
action anytime soon. john: it currently looks a very long way away. >> it does. john: not something that is going to happen -- >> i think that is right. i would be surprised if it happen anytime -- john: how big q.e. would have got by then? presumably there are some point in which you could have too much q.e. >> i think at the moment, you know, we're purchasing 60 billion more gilts. we will finish that at the end of the year. i think we have reached 23% in gdp but then remember, if we gdp there, it is share of declines over time as the economy recovers. john: one hopes. >> exactly. if we have to purchase more, that will change. now having seen that relative to the ecb and the bank of japan we have a relatively small share of gilts compared to gdp and other central banks have gone further.
i do think we could go further if we needed to. john: you also talked about the neutral rate of interest, being what you hoped would still determine -- as a rough indication, what do you think the neutral rate of interest is for britain? >> well, we're working on some estimates at the moment. i think there is a bit, still some work we need to do before we make that public. but it is certainly closer to zero than what it used to be. you can see from the charts that historically if you go back, interest rates in this country have always been around 5%. bank rates going back hundreds of years. there are some academics who look to interest rates in ancient babylon. even then it was around 5%. and something has changed in the the biga, in which
forces of demography and global savings and investment balances mean that the neutral rate has fallen and is likely to stay low for a very long time. john: can you make larry summers day and recall secular stagnation? >> um... john: no. >> it is interesting you say that. the termvered that secular stagnation was actually invented by an economist in the the americanve economics association lecture and called the low-inflation, low growth world secular stagnation. it is actually a very old term. but, of course, it did not last forever, did it? i guess the question is whether we can get out of the current low growth, low inflation world -- john: you see this sort of current, not just being a temporary factor.
if you think of everything you said, stretching out over a very long time, 2%. this is going to go on for quite some ways. this is not a temporary phase we are living through. five years or 10 years. >> yes. these forces are long-term. and long-term rates will be low for quite a while. john: particular in the context of someone about to leave the central bank, do you think that too much pressure has been put on central bankers? many television shows -- we focus on what such a banks are doing. the markets hang on every word you say. that you are both scapegoats and heroes. >> yes. athink central banks did great deal that was very important in the immediate aftermath of the crisis. central banks, if you go back to the 1930's, raised interest rates in the wake of the
financial crisis, we got the great depression. central banks did a huge amount to a first that this time. we have had a great recession but it has not been a depression. central banks deserve a lot of credit for that work. as i said, we are not the whole story. we can only do so much. there are only certain things that we have the tools to affect. and other policies are needed in order to get the kind of sustained recovery we would all like to see. john: when you took on the job, did you expect by now -- you talked about moving on to unwinding quantitative easing. did you expect politicians, governments have taken up more of the slack? >> as you can see from my radar, when i started the world was very green. we were absolutely seeking q.e. and normalizing interest rate. since then, the world has seen several economic shocks which have set us back from that path. and i also think these long-term alsors, neutral rates, but
the poor performance of productivity have meant that we have not been able to return to a more normal world as quickly as we expected. yes, clearly, that has been a disappointment. compared to other counterfactual's it is probably much better than it could have been. startdo think we need to addressing some of those longer-term structural factors if we're going to get out of this low growth, low inflation world. john: thank you very much. thank you very much for talking to bloomberg. >> thank you, john. [applause] nejra: that was the deputy governor of the bank of england taking questions from bloomberg's editor in chief at bloomberg markets most influential summit. we have breaking news from deutsche bank. you may he's seen some of it on the screen. saying she does not
see a comparison between deutsche bank and lehman. we have got a few headlines. this is the german broadsheet saying the german government is working on a deutsche bank contingency plan, policymakers are examining a state guarantees. the government is looking at a deutsche bank stake. and it is also planning for a case where deutsche bank could not cope with a u.s. fine. the plan includes state guarantees for deutsche bank unit sales. quite a few things coming out. you have got the share price. up 2.8% on the day. we saw it dip after headline started dropping, but it seems to have recovered. that is deutsche bank. remember, that stock hit a record low on monday on concerns about legal costs and its capital. of course, we have got other news. deutsche bank agreed to sell its u.k. insurance unit to phoenix. we will talk more on that later.
first, earlier we spoke to the ubs chairman. we told us that european banking is much more stable and deutsche bank is not facing a lehman moment. >> if you look at where banks are now, banks have, rates by a factor of seven. some banks by a factor of 10. the system is much more stable. individual players. the linkages between the various banks have largely been reduced to a sustainable level. there is a much more stable system. when regulators needed to intervene last time, it was not about single institutions. there were institutions they wound down. it was about stabilizing the system. the system is much more stable now. interventions in the future will only be driven by the need to stabilize the system. and there will be no focus on single players. >> so, this is not a lehman moment? >> no.
in termse are very far of how solid banks are from where we were in 2007-2008. we have issued huge amounts of capital. our capital ratio is 14%. you can run a large global bank between 1% and 2% capital before the crisis. so, much more capacity. on top, we are issuing -- t back. so there is a much broader set of issuers and estimates available in case. loss absorbing capacity is up massively now. it is not a question i think about capital. it is not a question about liquidity. it is more about business model. not worried about any linkages you have a deutsche bank? the lastaid, over years, we have massively reduced our interbank exposure, across the board. the interbank market which was an unsecured market and short
duration has really come down massively. pensionnt companies, funds, insurance companies have really reduce their exposure to the banking market. so have banks reduce their exposure to each other. and a lot of what we're seeing in the market now has very little to do with sustainability and with capital. it is more about profitability and business models. and that is where there are various concerns in the market. banks need tore do hard work. this is an unprecedented environment and you need to have a business model that is kind of weather proved. all weather business models are now what is needed. so, diversity of the business you're in and excellent is the key factor. nejra: that was the ubs chairman speak about european banks. let's get more on deutsche bank. a newspaper reporting the german government is looking at a stake in the bank as an option. let's get the details with
michael moore. we are seeing the shares up. today,s news we had including the insurance unit sale to phoenix, is this looking good? michael: you have had the ceo say they do not need cap let this point. -- need capital at this point in time. it wouldn't expect the government to do some scenario planning. -- you would expect the government to do some scenario planning. the big thing on the sale is getting it done and having it be capital accretive. even though they are taking a loss. you want to see steady progress on the capital ratio. nejra: that capital very much in focus. are you hearing from people you speak to this could be a lehman moment? >> people do not see it as that type of thing. it has been playing out for the last several years. nejra: thank you so much.