News 24.02.2013

Deutsche Bank and Allianz warned by own research departments of grave consequences

A total of six papers from the research departments of Deutsche Bank and Allianz prove that contrary to their public statements, the companies themselves assumed that speculation with agricultural commodities could lead to higher food prices and as a result to hunger.

In a document identified as “For internal use only, confidential” of the Allianz Group, which has been made available to the consumer rights organisation foodwatch, it was stated that it “seems reasonable” that speculative capital flows “at least (…) enforced price trends”. The research department of Allianz had already put on record in 2008 that “The price spikes on agricultural markets were not sparked off but were compounded by speculative factors”.

Deutsche Bank lied to committee of German Parliament

Four documents of the DB research department demonstrate that Deutsche Bank lied to the German Bundestag about its findings. On 27 June 2012 the chief economist of the company, David Folkerts-Landau, told the Bundestag Committee for Economic Cooperation and Development that “There is hardly any sound empirical evidence for the claim that the increasing importance of agricultural financial products has led to price increases or increased volatility.” By contrast, the research department of Deutsche Bank wrote “Speculation has also contributed to price increases.” DB Research gave an express and unmistakeable warning of the consequences, “Such speculation can have grave consequences for farmers and consumers and is, in principle, unacceptable.” The assessments made by DB Research may well have been known to Folkerts-Landau – he is the head of the department.

All in all, the papers of Deutsche Bank and Allianz repeatedly presented the varying empirical findings concerning the influence of speculation on prices. The main cause for rising prices was seen in fundamental developments (rising demand, bio-fuel production, etc.). But contrary to the public statements of Deutsche Bank joint head Jürgen Fitschen and Allianz director Jay Ralph, who even presented speculative financial products as an instrument in the fight against the hunger crisis, the research departments of both companies were firmly convinced that speculation could also exacerbate price developments. “It cannot be totally dismissed, that speculation at least supports excessive price developments”, one Allianz paper wrote.

Short-term price rises alone can lead to permanent damage

foodwatch demanded that Deutsche Bank and Allianz immediately remove all financial products that bet on the price development of agricultural raw materials. Short-term prices rises alone can lead to permanent damage or even death in chronically undernourished children – the mere probability of such consequences involves an obligation to terminate excessive speculation on prevention grounds.

Deutsche Bank researchers even endorsed political intervention in a 2010 document, “More regulation in the derivatives market overall will be helpful in avoiding excesses.“ That would be necessary – but there is no mention of it today.