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Deutsche Boerse urges banks to overhaul amid cheap funds

A notebook with the logo of Deutsche Boerse Group (German stock exchange) is pictured before their New Year's reception at the headquarters in Eschborn, outside Frankfurt, Germany, January 25, 2016. REUTERS/Kai Pfaffenbach

FRANKFURT (Reuters) - Financial services firms must take advantage of rock bottom interest rates to make investments and takeovers and rethink business models, the chief executive of German exchange operator Deutsche Boerse said on Monday.

Near zero interest rates played an important role in Deutsche Boerse's takeover of index provider Stoxx and foreign exchange trading platform 360T last year, Carsten Kengeter said in the text of a speech to the exchange operator's New Year's reception.

"Thanks to low interest rates, we were able to finance these acquisitions at very attractive terms indeed," Kengeter said.

"The financial services industry should see the low-interest rate environment as a chance to invest," he said.

While takeovers must be carefully weighed, the low rate environment could spur moves towards new business models and a new corporate culture, Kengeter said.

"In this way, we might even succeed in triggering a self-accelerating growth spiral," Kengeter said, adding that Germany needed to promote a more entrepreneurial spirit and improve the financing of companies in their growth phase.

Deutsche Boerse Chairman Joachim Faber, speaking at the same event, said Europe needed to strengthen the financing of companies through the capital markets and reduce the dependence on bank loans, which would speed recovery from crises.

"The major capital market participants, the big institutional investors, are under pressure to invest even during the crisis and immediately after the crisis, while banks first have to cover their crisis-induced credit defaults," said Faber, a former board member in charge of asset management at Europe's biggest insurer, Allianz.

(Reporting by Jonathan Gould; editing by Adrian Croft)