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Deutsche Bank: Germany's Financial Colossus Stumbles
- JumpCrisscross 11y agoMaybe now we'll finally get eurozone-wide mutualised deposit insurance.
- testerooooooo 11y agoYeah, that will solve it. Just like the eurozone money solved all the problems 15 years ago.
- Findeton 11y agoPrecisely part of the problem was to give everyone the same currency but make every country fight each other for debt.
- cmdkeen 11y agoMore precisely everyone got the same currency but didn't have to actually live by the stability pact. The politics of Euro membership were more important than the reality. Greece should never have been allowed to join, France and German routinely ignored the Stability and Growth pact. The problem with DB is that Germany cannot let it fail because it underwrites its export economy, plus it would be a national humiliation. However bailing it out after imposing austerity on the PIGS, especially Greece would pour fuel on the fire of anti-German sentiment in the EU.
- Atropos 11y agoWouldn't help, Deutsche Bank doesn't have too many retail clients, getting reimbursed for 100.000 Euros of deposits doesn't help the typical corporate client much. Highly unusual for an investment bank, they acquired Postbank to open up a retail channel, but that is < 5% of the size of Deutsche Bank.
- _Codemonkeyism 11y agoGerman media makes a point that Deutsche Bank has been hit hard with the fines from their (past) crimes. Investment bankers and CEOs took their bonuses and moved on. Spiegel reports Deutsche Bank used $15 billions since 2012 for legal disputes.
- Hermel 11y agoI wonder why there isn't more resistance against the exorbitant fines the US charges European banks every year. These fines have become a significant business risk and should be regulated in free trade agreements, just like subsidies are limited in such agreements. For many European banks, the US business is a money drain, i.e. it costs them more than they get from it. However, they cannot escape US regulation and legal exposure as long as they want to have the ability to trade US dollars. In the end, this is a hidden tax the US charges on all banks world wide, just because it is powerful enough to do so.
- Kristine1975 11y agoMaybe the banks should simply stop committing crimes.
- CodingGuy 11y agoThey can't - they are banks!
- vetinari 11y agoThese are not crimes where the banks are headquartered and from where they are doing the business. Maybe US should not project their legislation on foreign subjects? They didn't vote for anyone who created that legislation anyway.
- pizza234 11y agoIt really depends on how big the bank is. If a bank is really big, like HSBC, it can't/won't be penally prosecuted in real world, so the rational choice [1] is actually to keep committing crimes, and settle the ones where they're caught. On the scale of such bank, even fines which would be astronomical from the perspective of a normal citizen, are peanuts (so to speak) for a large bank. [1] = in a logical, not moral, sense.
- jgreen10 11y agoWell, Germany has been allowed to act as the emperor with no clothes for a while now; an economic powerhouse sitting on empty pension chests with an ageing population. To compare pension fund assets: US: $46k/capita UK: $42k/capita Netherlands: $76k/capita Germany: $2.9k/capita http://www.oecd.org/finance/Pension-funds-pre-data-2015.pdf http://www.oecd.org/finance/Pension-funds-pre-data-2015.pdf
- Tomte 11y agoGermany has a PAYGO mechanism when it comes to pensions (which is incidentally the only crisis-resistant and -adaptive kind of pension system). Those "pension fund assets" can therefore only be private pension contracts on top of it.
- wobbleblob 11y agoMy colleague from Greece has been giddy as a schoolboy about this story all week. Not quite the roaring, thunderous fits of laughter as with the Volkswagen scandal, but this is still developing.
- Kristine1975 11y agoI'm from Germany and the troubles of the Deutsche Bank please me to no end. The only thing I'm scared of is that it will be declared "too big to fail" and bailed out with tax money, while at the same time there's no money for schools, police, refugees etc because Wolfgang Schäuble is obsessed with his "black zero".
- wobbleblob 11y agoMaybe he can propose to sell some of the German islands to cover the bailout.
- kuschku 11y agoAnd then let Greece pay for the bailout! Good idea. We get rid of Sylt, and Greece has to pay.
- chvid 11y agoGermany led by Merkel has set itself up for trouble. Cyprus and Greece have created a precedence for creditor bail-ins. Public finances are stretched due to refugee inflows and opposition to Merkel is growing even internally in her massive coalition government. This setup may lead to something not predicted (ie. DB not getting the guarantees it needs or even a creditor bail-in) or more predictively the rise of left or right-wing non-established / populist politics.
- emptyfile 11y ago>Public finances are stretched As others have pointed out https://www.cia.gov/library/publications/the-world-factbook/rankorder/2187rank.html https://www.cia.gov/library/publications/the-world-factbook/... https://en.wikipedia.org/wiki/List_of_government_budgets_by_country#cite_note-cia.gov-1 https://en.wikipedia.org/wiki/List_of_government_budgets_by_... The only two countries in the world which have a higher surplus than Germany are Norway and Qatar
- DangerousPie 11y agoPublic finances are only stretched because the German government (and the electorate) has a weird aversion to taking on new debt. If she wanted to, Germany could essentially borrow money for free thanks to extremely low or even negative interest rates.
- chvid 11y agoThe money still would have to be paid back. Secondly interest rates are low due to low inflation masquerading a higher real interest.
- tomp 11y agoHowever, Merkel also pushed new EU legislation, so the government cannot help the bank (even if it has unlimited money) until depositors are bailed in. Currently, however, Italy is trying to find a loophole, that Germany might use as well later.
- kriro 11y ago1) I'd hardly call them stretched. 2) I wouldn't call it a "weird aversion". Weimar Hyperinflation (and the consequences) is still in the public's heads. Compared to other places I have lived people in Germany are indeed more reluctant to debt-finance things in general and "save before buying". I think it's a fairly healthy base attitude (but I'm probably biased being German). It's less valuable currently with near 0% credits everywhere but as a base mindset it helps avoid the trap of not finding a way to generate the expected revenue streams eventually.
- vegabook 11y agoDeutsche Bank is counterparty to 55 trillion euros of derivatives contracts (about 65 trillion USD). I worked for 3 years on its trading floor. It was Sales-a-gogo. "Print as much as you can". It's one of the very biggest counterparties to derivatives. Imagine if there was basis risk of only one tenth of one percent on those books (ie hedge imperfection usually due to a third factor such as credit quality or geographic mismatch). That would mean a P&L of 32.5 billion dollars. For risk on only one thousandth of the notional value of its derivatives books. Deutsche Bank is only worth 22 billion dollars. Now of course such P&L could be positive too, but inevitably, when the wolves of the markets start hunting, they'll seek out the positions that are "wrong way". Let alone if DBK starts to try to unwind some of these derivatives. I bet it wouldn't be able to unwind even 2% (1.3 trillion!) of the books without blowing itself up. I think this bank is Exhibit A to the catastrophic excesses of the past 20 years.
- mohawk 11y agoYou've hit the nail on the head, the derivatives they have on their books are massive compared to shareholder equity. "Counterparty risk" are the words nobody analysing bank's derivatives positions wants to hear. It's a terrible mistake there has never been a separation of investment banking from commercial banking in Germany (i realise the line is hard to draw), because the German taxpayer is essentially guaranteeing this shoddily run bank. Unfortunately German politicians seem to be quite oblivious to this problem. Joe Ackermann (then CEO of DB) was giving Merkel advice on the financial crisis of 2008, so there seems to be some asymmetry of information there...
- binarray2000 11y agoNot only giving advice: "Deutsche Bank boss throws party, Merkel foots the bill" (http://www.dw.com/en/deutsche-bank-boss-throws-party-merkel-foots-the-bill/a-4596587 http://www.dw.com/en/deutsche-bank-boss-throws-party-merkel-...).
- paganel 11y ago> I think this bank is Exhibit A to the catastrophic excesses of the past 20 years. Only partially related, I remember one of the German landsbanke (can't remember its name) buying full one-page splashy ads in magazines like The Economist, back in 2007. Only one year later they went catastrophically under because they had bought in into the subprime lending and its derivatives' mania. I remember one of the directors saying something like "we didn't know what exactly we were buying, those products were too complicated for us, we trusted the people who had sold them to us". It's fools all the way down.
- aluhut 11y ago> Headquartered in the same city as the bank, the newspaper said I thought their HQ is in London.
- Libermentix 11y agothe bank is headquarted in Frankfurt: https://www.db.com/en/content/Imprint.htm https://www.db.com/en/content/Imprint.htm As far as i know the Investment Banking branch mainly operates from out of London.
- simi_ 11y agoMoving from the UK to Germany, I chose Deutsche Bank based on its reputation. Pros: * English! There is always someone on the phone who can speak English, and they can even send their letters in English. (for Germany, this is very rare) * More "high touch" - there is a person assigned to your account * I can't remember if this was the case in UK, but I noticed that transfers to some Western EU countries have no fees and happen almost instantly. Yay! Cons: * Buggy app and web interface, sometimes the login fails or hangs randomly (revenue was €31.95 billion in 2014, it's understandable that they can't afford spending too much on this) * The way to authorise online transactions is with a piece of paper with 100 codes printed on it (TAN list). This was a shock, but it's apparently common here. * Taking advantage of new customers. They offered me a loan which I later realised had a ridiculous interest rate. (I guess this isn't exclusive to DB, but silly me expected that a good, more prestigious bank would value longer term customer relationships) * Stupid useless cards. The default account (€5/month) comes with a card (EC Karte) that can only be used at German ATMs and in most German stores. Good luck trying to do anything online with it. For that you need a credit card (extra €5/month), the very idea of something like VISA Debit seems completely alien to Germans.
- dualogy 11y ago> The way to authorise online transactions is with a piece of paper with 100 codes printed on it (TAN list). This was a shock, but it's apparently common here. Well whoever can hack your password, mobile TAN or TAN reader device will likely still not hack into your paper TAN list. There's something to be said for a "physical layer".
- kecks 11y agoVISA debit isn't available in NL either. I get the impressions very few countries actually give out these cards.
- SyneRyder 11y agoIn Australia, pretty much every bank account will include a free Visa / Mastercard debit card, built-in to your ATM card. You can also buy them in supermarkets as reloadable gift cards, or post offices as international travel cards. Though they typically won't work in Germany, since most German stores only accept EC Cards and not Visa / Mastercard.
- whatok 11y agoJust announced that they're tendering for EU3b, $2b debt, stock up 11%