Deutsche Bank Facing Collapse

Posted by DanielS on Wednesday, 05 October 2016 21:17.

TEC, “Deutsche Bank Collapse: The Most Important Bank In Europe Is Facing A Major ‘Liquidity Event”, 30 Sept 2016:

The largest and most important bank in the largest and most important economy in Europe is imploding right in front of our eyes.  Deutsche Bank is the 11th biggest bank on the entire planet, and due to the enormous exposure to derivatives that it has, it has been called “the world’s most dangerous bank“.  Over the past year, I have repeatedly warned that Deutsche Bank is heading for disaster and is a likely candidate to be “the next Lehman Brothers”.  If you would like to review, you can do so here, here and here.  On September 16th, the Wall Street Journal reported that the U.S. Department of Justice wanted 14 billion dollars from Deutsche Bank to settle a case related to the mis-handling of mortgage-backed securities during the last financial crisis.  As a result of that announcement, confidence in the bank has been greatly shaken, the stock price has fallen to record lows, and analysts are warning that Deutsche Bank may be facing a “liquidity event” unlike anything that we have seen since the collapse of Lehman Brothers back in 2008.

At one point on Friday, Deutsche Bank stock fell below the 10 euro mark for the first time ever before bouncing back a bit.  A completely unverified rumor that was spreading on Twitter that claimed that Deutsche Bank would settle with the Department of Justice for only 5.4 billion dollars was the reason for the bounce.

But the size of the fine is not really the issue now.  Shares of Deutsche Bank have fallen by more than half so far in 2016, and this latest episode seems to have been the final straw for the deeply troubled financial institution.  Old sources of liquidity are being cut off, and nobody wants to be the idiot that offers Deutsche Bank a new source of liquidity at this point.

As a result, Deutsche Bank is potentially facing a “liquidity event” on a scale that we have not seen since the financial crisis of 2008.  The following comes from Zero Hedge
:
  It is not solvency, or the lack of capital – a vague, synthetic, and usually quite arbitrary concept, determined by regulators – that kills a bank; it is – as Dick Fuld will tell anyone who bothers to listen – the loss of (access to) liquidity: cold, hard, fungible (something Jon Corzine knew all too well when he commingled and was caught) cash, that pushes a bank into its grave, usually quite rapidly: recall that it took Lehman just a few days for its stock to plunge from the high double digits to zero.

  It is also liquidity, or rather concerns about it, that sent Deutsche Bank stock crashing to new all time lows earlier today: after all, the investing world already knew for nearly two weeks that its capitalization is insufficient. As we reported earlier this week, it was a report by Citigroup, among many other, that found how badly undercapitalized the German lender is, noting that DB’s “leverage ratio, at 3.4%, looks even worse relative to the 4.5% company target by 2018″ and calculated that while he only models €2.9bn in litigation charges over 2H16-2017 – far less than the $14 billion settlement figure proposed by the DOJ – and includes a successful disposal of a 70% stake in Postbank at end-2017 for 0.4x book he still only reaches a CET 1 ratio of 11.6% by end-2018, meaning the bank would have a Tier 1 capital €3bn shortfall to the company target of 12.5%, and a leverage ratio of 3.9%, resulting in an €8bn shortfall to the target of 4.5%.

The more the stock price drops, the faster other financial institutions, investors and regular banking clients are going to want to pull their money out of Deutsche Bank.  And every time there is news about people pulling money out of the bank, that is just going to drive the stock price even lower.

In other words, Deutsche Bank may be entering a death spiral that may be impossible to stop without a government bailout, and the German government has already stated that there will be no bailout for Deutsche Bank.



Comments:


1

Posted by Euro currency creator: "it will collapse" on Mon, 17 Oct 2016 12:28 | #

Express, “The Euro is FINISHED’ Currency’s creator says it will soon COLLAPSE and destroy the EU”, 17 Oct 2016:

THE Euro is a ticking time bomb which will soon blow up and wipe out the whole EU project in its wake, the currency’s creator has said in an extraordinary warning today.

“Euro founder Otmar Issing has predicted that the currency will collapse.”

In an explosive intervention professor Otmar Issing predicted that Brussels’ dream of a European superstate will finally be buried amongst the rubble of the crumbling single currency he designed.

The respected economist launched a withering attack on eurocrats and German leader Angela Merkel, accusing them of betraying the principles of the euro and demonstrating scandalous incompetence over its management.

And he savaged the whole idea of a United States of Europe, saying the attempt to push through federalisation by the back door had churned the ground the currency was built on into a quagmire of patchwork legislation, into which it is fast sinking.


2

Posted by Deutsche Bank: 'Rosetta Stone' to Trump finances on Thu, 20 Feb 2020 13:38 | #

NPR, 19 Feb 2020:

‘Dark Towers’ Exposes Chaos And Corruption At The Bank That Holds Trump’s Secrets

In the 1990s, long before he became president, Donald Trump was known as a cash-strapped New York City businessman with shaky credit.

“His record of defaulting on loans and stiffing his business partners was very long and very well-documented,” New York Times finance editor David Enrich says. “Any mainstream financial institution that had competent risk management systems in place — there is no way they were going to do business with Donald Trump.”

Enter Deutsche Bank, which Enrich says was a “second-tier player” in the banking world in the 1990s. Seeking to make a name for itself, the bank was willing to work with Trump when others would not.

“The bank was so hungry for profits, for short-term profits, and so hungry to make a name for itself in the United States that it was really eager to just disregard any red flags that presented themselves with clients,” Enrich says. “Trump would default on a bond offering. He would default on a loan. He would sue the bank. And yet, time after time, Deutsche Bank executives kept going back to him for more business.”

Congressional committees have since subpoenaed the bank’s records on Trump — including suspicious activity reports that are usually filed with regulators. Meanwhile, the Trump family has sued the bank to block it from complying with the subpoenas that they’ve received from these congressional committees.

Congress Subpoenas Deutsche Bank As Part Of Democrats’ Probe Of Trump Finances

POLITICS

BUSINESS

Trump Sues 2 Banks To Block Democrats From Investigating His Finances
All told, Enrich estimates that Deutsche Bank loaned Trump some $2 billion — which helped pave the way for his political rise.

“I think that’s a big part of the reason that Donald Trump is president today, because of the financial support he received over many years from his lender of last resort,” Enrich says.

Enrich has spent years reporting on Deutsche Bank, which, in 2007, was the world’s largest, with $3 trillion in assets. He traces the bank’s shadowy practices — which range from laundering money for Russian oligarchs to violating international sanctions — in the new book, Dark Towers.

Interview highlights

Dark Towers

Deutsche Bank, Donald Trump, and an Epic Trail of Destruction

by David Enrich

Hardcover, 402 pagespurchase

On Deutsche Bank’s concerns about Trump holding political office

As a leading candidate for the president of the United States, he is what’s called, in banking terms, a “politically exposed person,” which means there is heightened risk of corruption ... that this person could be involved in bribery or that their money could be from ill-gotten means. The bank was very wary of doing business with Trump as the election neared and, in fact, rejected [a] requested loan that he made in early 2016. ...

Inside the bank, compliance officers had been looking at some of the transactions that were going in and out of Donald Trump’s bank accounts, and Jared Kushner’s bank accounts, too. Kushner was also a big client of Deutsche Bank. And what they were seeing was that money, in some cases, was flowing to international sources, in some cases wealthy Russians — that raised a lot of concerns from a money-laundering perspective. So compliance officers within the bank essentially blew the whistle and said: These transactions are troubling. We need to report them as suspicious to the federal government. And these concerns were kind of elevated up the flagpole within Deutsche Bank, and managers and executives at a higher-level ultimately decided that, no, these concerns did not need to be escalated to the government or even reported to the government. But within the bank, there was a big concern that something weird was going on in the Trump bank accounts.

Within the bank, there was a big concern that something weird was going on in the Trump bank accounts - David Enrich

On Deutsche Bank’s ties to the Nazi regime

This was the bank that helped do everything from finance the construction of concentration camps. It helped with the financing for the company that manufactured poison gas. It participated in the “Aryanization” of businesses all over Europe, including in countries that Germany had conquered. It was selling gold that the Nazis had extracted from the teeth of Jews, selling that internationally to raise hard currency for the Nazis. So this was a bank that was really an important part of the Nazi military machine. Now, in fairness to the bank, that is true for most large German companies that existed at the time, and still exist to this day. So it’s not that Deutsche Bank was uniquely evil during this period — but I don’t think there’s any sanitizing of this basic fact: The reality is that they were a party to genocide.

On Deutsche Bank’s transformation in the 1990s

POLITICS

Deutsche Bank Is The ‘Rosetta Stone’ To Unlock Trump Finances, Journalist Says

Deutsche Bank went from being a complete nonentity on Wall Street and in London to being, virtually overnight, one of the leading players on the street. Edson Mitchell [who led the bank’s London office] was the one who led that charge, and he was a fairly impulsive, very charismatic, very energetic salesman. ... Largely through the force of his personality and through the power of persuasion of having a few billion dollars at his disposal to spend on hiring people, [Mitchell] hired thousands and thousands of people, not just from Merrill Lynch, but really from across Wall Street. And so Deutsche Bank all of a sudden became one of the most aggressive places to work on Wall Street.

On how CEO Josef Ackermann’s leadership changed the bank in 2002

PLANET MONEY

Episode 914: Trump And Deutsche Bank, A Long Affair

[Ackermann] wanted to increase the bank’s profitability within two years by about 600 percent. That is crazy. It’s wildly ambitious. [He was] reckless and he was a taskmaster and he was someone whose staff was very afraid of disappointing him. He could get extremely angry. And sometimes [he’d] blame his subordinates for failings, not just in private, but also in public. So people are really scared of doing anything that would incur his wrath. So everyone’s set out to make Ackermann’s mandate, make it their own personal mission. The entire incentive structure within the bank quickly changed. And the way that the bank decided whether or not to make loans or enter into other transactions for customers also changed. If it wasn’t going to be enormously profitable in the immediate term, they just wouldn’t do the business anymore.

The consequences of that are seen, with hindsight, [as] fairly predictable, which is that the bank is going to be doing things that are not in customers’ interests, but are in the bank’s interests. And it’s a very straight line, I think, between that mentality and a situation where the bank starts ripping off its customers, manipulating markets, laundering money, violating sanctions, on and on and on.

On Deutsche Bank violating American sanctions

This is an international bank and it has a presence, a headquarters in Germany and presences all over the world, but because it has a big American operation, it has to adhere to American law, and American law at the time imposed very strict sanctions on Iran, Syria, Myanmar and Libya, among other places. But Deutsche Bank wanted to do business in those countries. The fact that they were under sanction, in some ways, increased the value of the services the bank could provide, because there weren’t all that many banks that were willing to provide financial services in those countries.

BOOK REVIEWS

‘Dark Towers’ Chases Scandal-Ridden Deutsche Bank’s Mysterious Ties To Donald Trump

So they just went ahead and did the business and they took extraordinary lengths to conceal what they were doing. They [engaged] in a practice that was known as “stripping,” where they would remove any references to, for example, the Syrian counterparties they were working with in order to avoid triggering any alerts in their American computer systems or with American regulators. And over a period of several years, they engaged in billions of dollars of business with entities that, in Iran’s case in particular, were very closely tied to the Iranian military and were later blamed for really helping finance a lot of terrorism that was going on in Iraq after the Iraq war.

On Deutsche Bank laundering money for Russian customers

Many Western banks were very wary of doing business with these Russians because there were a lot of suspicions. And, in fact, it was true that a lot of this money came through corruption or kleptocracy, things like that. Deutsche Bank was very happy to fill that void.

David Enrich

The money laundering business was very lucrative for Deutsche Bank and it did it really all over the world. The biggest places it was doing it were with Russian customers. And Deutsche Bank has a long, proud history of being one of the few Western banks [that has], more or less without interruption, been operating in Russia for a very long time. And Russia in the early 2000s was a place where there were a lot of people getting very rich very quickly, often through suspicious means. It became very important for them to have a way to get their money out of Russia and converted from rubles into euros or dollars or pounds. ... Many Western banks were very wary of doing business with these Russians because there were a lot of suspicions. And, in fact, it was true that a lot of this money came through corruption or kleptocracy, things like that. Deutsche Bank was very happy to fill that void. It arranged for a number of workarounds for Russians where they could either move their money to a country like Latvia, for example, and then have it wired into the U.S.

On the chaos at the Deutsche Bank office in Jacksonville, Fla., which analyzes suspicious transactions

This was a place where they have thousands and thousands of employees who are trained to look for potentially suspicious transactions involving money laundering, tax evasion, bribery, things like that. In any bank that is one of, if not the most important, operations to prevent a bank from getting into trouble and violating the law. And Deutsche Bank’s operations there were a catastrophic mess.

I’ve talked to probably 20 people who either currently or previously were there, and without failure, every single one of them has told me that they have never worked at an institution as messed up as Deutsche Bank. The reason it’s messed up, in this case, is not that their employees aren’t good at what they do. [The company] essentially set them up to fail. Their technology systems were completely out of date. People weren’t properly trained in some cases. But more than that, there is enormous pressure from their higher ups to just churn through transactions as quickly as possible, and the less of a fuss you raised about any particular transaction, the better. There is enormous pressure to just get deals done, as one person told me. That’s obviously antithetical to the notion of doing a good job and taking a close look and really being conservative about whom you’re doing business with, but that was the Deutsche Bank way.

Sam Briger and Mooj Zadie produced and edited the audio of this interview. Bridget Bentz, Molly Seavy-Nesper and Meghan Sullivan adapted it for the Web.



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