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QE: good for Europe but a big risk to bank margins, Deutsche boss warns

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Former US Vice President Al Gore delivering a presentation on climate change at a session of the World Economic Forum yesterday

Former US Vice President Al Gore delivering a presentation on climate change at a session of the World Economic Forum yesterday

AFP/Getty Images

Zhang Xin, Chief Executive Officer and Co-Founder of SOHO China attends The New Growth Context event at the World Economic Forum.

Zhang Xin, Chief Executive Officer and Co-Founder of SOHO China attends The New Growth Context event at the World Economic Forum.

REUTERS

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Former US Vice President Al Gore delivering a presentation on climate change at a session of the World Economic Forum yesterday

A mass bond-buying programme by the European Central Bank will have a profound effect on banks in Europe and could destroy margins, it was claimed at Davos yesterday.

The forecast from Deutsche Bank co-chief executive Anshu Jaino was during one of the first panel debates kicking off business at this year's World Economic Forum.

Mr Jaino appeared to warn that an expected announcement of quantitative easing by the ECB today would be good for Europe, but ultimately challenging for the banks.

"QE means stability for Europe and a better loan-loss provision environment, fewer bankruptcies and a stable landscape that ought to be good for banks,'' he said.

"Equally it means very low interest rates and a real destruction of net interest margins, which of course will be a huge challenge. So the best parts of our businesses, the deposit taking and the flow franchise businesses, will all suffer."

The ECB is widely expected to announce a new scheme to buy Eurozone government bonds, known as quantitative easing or QE, possibly at its Governing Council meeting today, to combat the threat of deflation and get the Eurozone economy back on a steady footing. Earlier, former Bundesbank President and now chair of UBS, Axel Weber, said warned that inflation levels in the Eurozone won't get back to where the ECB wants them for years to come.

More than 2,500 people are taking part in the four-day annual event in Davos, the picturesque Swiss Alpine resort high up in the east of the country, including 1,500 business leaders and dozens of heads of state.

Among the main events yesterday morning was an appearance together on stage by former US Vice President Al Gore and US singer Pharrell Williams, as they announced another round of Live Earth Concerts to take place in seven continents, including Antarctica, in June.

Mr Gore said it will be the largest event of its kind ever staged, with concerts in locations including Paris and New York.

The purpose is to have a billion voices with one message, to demand climate action now.

In a stark presentation in the Congress Centre's main hall, Mr Gore reiterated the fact that last year was the warmest on record, and highlighted the litany of natural disasters and flooding in recent years, which he blamed on rising temperatures.

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