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Deutsche Bank: Reeling, but not Lehman

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Deutsche Bank: Reeling, but not Lehman

Before the European Bank stress test, the future of the German Bank seems to be unclear than ever. Some consider Germany’s most important Bank, even for a fire-dangerous. You have to Worry?

Deutsche Bank, by far the most important money house in the country, comes not from the headlines. A record loss last year, the share price is in the basement, every fourth branch is closed, there are now rumors of a split. The Bank was “more likely a Zombie as a Champion,” wrote recently in the newspaper
“The Economist”.

As if all this were not bad enough, the International monetary Fund (IMF), the Institute in June as a
most dangerous Bank in the world, because it contributes the most to the systemic risks – even more than the HSBC Bank.

“If the German Bank is more dangerous than competing houses such as Goldman Sachs, HSBC, Morgan Stanley or Barclays, it is difficult to assess,” says Martin Hellmich, Professor for the Management of financial risks at the Frankfurt School of Finance.

Too little capital

Too little capital, too much of a risk: Deutsche-in-chief Cryan

However, the German Bank, measured by balance sheet total of around € 1.6 trillion, less equity than the competition. “If you have very strong networking of a large trading business sees this combination to be very many customers around the world, but at the same time a scarce capital equipment – then you can come to the assessment of the IMF.”

And Deutsche Bank is compared with the Lehman Brothers, the US investment Bank, whose Bankruptcy in 2008 as an accelerant for the global financial crisis took effect. Particularly alarming is the huge mountain of derivatives. These are financial products that enable exporters against currency fluctuations and investors against fluctuations in interest rates can secure.

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But there are also derivatives, which are bets on specific events and not related to real transactions. Because of this type of derivatives played in the sub-Prime crisis in the United States an important role, such products in the public perception into disrepute.

“Deutsche Bank has saved a very complex investment with a massive derivatives trading,” says the longtime Banker Christopher Wheeler, the analyses at Atlantic Equities in London banks. “And it is not entirely clear how big the risks in this Portfolio.”

42.000 billion euros of derivatives

According to the current
Deutsche Bank annual report:is# the sum of the derivatives at Deutsche Bank in an impressive 42 trillion euros, or about 42,000 billion, one of the largest positions in the global financial industry. For comparison: The annual German economic performance is three trillion euros.

The huge sum is generated by the mere process of Adding all derivatives contracts – even if a part of it reversing, in fact, mutually exclusive. Financial risks-a specialist is called light me as an example, Swap transactions: When a customer secures 100 million Euro against rising interest rates, is another customer for the same sum against falling interest rates, then the interest rate risk of the Bank is equal to zero.

Still, he says brightly to me, is in the case of derivatives, the so-called counter-party risk. In a long chain of transactions and counter transactions, a Bank may tear broke many more companies into the abyss – a Domino effect that was also observed during the financial crisis.

However, derivatives are regulated more than in the past, and banks have to set aside for this business, more capital. “For Deutsche Bank for their high activity in the derivatives area means very high capital requirements”, so light me to the DW. “This is another point that puts the Bank under pressure.”

Who is the stress test?

Too little capital – for this reason, Deutsche Bank has not passed the end of June, also the stress test in the USA – for the second Time. The stress test of the European banking authority, the EBA on 29. July is not going to happen to her, believes the London-based Analyst Wheeler. The sun but less in the Bank than to the stress test itself.

“The stress test of the EBA will again produce a large Mish-mash of Numbers that are difficult to understand,” says Wheeler. “The Problem is that you deal in Italy, bad loans are quite different than in Germany.” In the USA, the Test would be clearer and more meaningful.

The European stress test, will this time made sure it was the cutter of the Italian banks. Because of lack of capital, has encouraged Italy’s government already in state aid, but which are not allowed under the new rules in the Euro-zone. Yes, it is possible to agree a derogation, should be about fall, is the third largest Bank in the country, Monte dei Paschi di Siena, during the stress test.

Headquarters of Monte dei Paschi di Siena: If the Bank falls, said to be true of the Deutsche Bank

Danger from Italy

The chief economist of Deutsche Bank, David Folkerts-Landau, has called recently for a European rescue Fund in the amount of 150 billion euros to stabilize the banks.

“In Europe, when banks come under pressure, then the transfers, of course, also to other banks,” says Hellmich, “especially on banks, which are big in the trading business.” Institutions such as the Deutsche Bank.

Nevertheless, I do not believe in hell, that Deutsche Bank is itself to be a rescue with taxpayers ‘ money rely, or even a Bankruptcy, such as Lehman is lying down. He sees rather a long and painful Phase of the realignment. “This can go so far that the Bank is divided into various business sectors.”

The London-based Analyst Wheeler is sure that the Bank get out on his own and their situation, and Not on the capital markets with fresh money can get. However, even if all else fails, would not go to the Bank. “The answer is in the name: Deutsche Bank,” says Wheeler. “Germany would do everything to help the Bank to solve their problems.”

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