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BANKING

Berlin blooper

Deutsche Bank speaker Rolf Breuer recently boasted that his bank's value-at-risk (VAR) models were the only ones in Germany to be approved by the supervisors in Berlin.

He was wrong.

One telephone call to Berlin established that Deutsche wasn't the first to have its models approved, nor does it have the lowest multiplier (the factor - a minimum of three - set by supervisors by which the VAR figure is multiplied to set regulatory capital).

"They weren't the first and they aren't the best," says an amused supervisor.

Maybe Breuer was guilty of overhyping Deutsche's achievements or maybe he was simply misinformed. But there should be concern that lack of transparency in this area is open to abuse and - heaven forefend - could give one a false impression of a bank's relative proficiency in risk management.

How can we put this temptation out of a chief executive's way? The obvious solution is to make the approvals and the multiplier public. When this was suggested in 1996 most banks threw up their hands in horror. They reckoned the multiplier was an unfair way to rate banks publicly.