'Made in Germany' doesn't yet appeal
Confident of gaining detailed coverage in the German business pages, capital markets broker Exco's new German managing director Hans Joachim Goehtz met the press on December 10. Over mushroom crepes served at the swanky Frankfurter Hof hotel, Goehtz and the firm's chief executive Peter Edge explained their strategy to transform Exco into an "investment bank", providing its bank clients with research and beginning spread trading, repo trading and financial engineering.
New clients would be sought. In an unguarded response to an unexpected question, Edge and Goehtz let slip that, yes, Exco had plans to approach Germany's cooperative Volksbanken (who tend to rely on DG Bank for capital-markets business) and the Sparkassen (who likewise use their local Landesbank).
Two days later Frankfurt's Börsen-Zeitung ran the story, mentioning the Sparkassen and Volksbanken in its headline. The bomb had dropped.
By lunchtime, every fixed-income head in German banking had read the story. The outrage was greatest at DG Bank and at the Landesbanken, who saw Exco's plan as a declaration of war. Yet even the private-sector banks were riled, because they do substantial business with the Volksbanken and Sparkassen too.