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Here Are the Signs That Deutsche Bank Is in Big Trouble


  • Here Are the Signs That Deutsche Bank Is in Big Trouble
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    Investors should worry when government ministers and executives insist everything is OK.

    When it comes to trouble, there’s a simple rule: The more someone — whether it’s your kid in the kitchen, your spouse after a fender bender or a government minister — insists that there’s no problem and that everything is OK, the bigger the problem.

    By that measure, the second-largest bank in Europe, Deutsche Bank (DB) , is in a lot of trouble. And this is a big deal. Deutsche Bank is one of the world’s 10 largest banks by asset, and the International Monetary Fund has said it’s the most important net contributor to systemic risks” to the global financial system. So, if Deutsche Bank gets into trouble, the entire global financial system will feel it like a hard punch in the gut. Here are three reasons you should worry about the health of this major bank.

    First, in February German Finance Minister Wolfgang Schauble, when asked his opinion about Deutsche Bank, replied that he had “no concerns.” Of course, if he had said he was worried about Deutsche Bank there would have been mass panic.

    If a high-ranking government minister feels obliged to tell the public that everything is fine with a major bank, it’s not a good sign. It’s worrying that a government minister has to say anything about it at all. (It’s the same when a government minister has to talk up a country’s currency, like we discussed here.)

    Second, at about the same time that the German Finance Minister commented on Deutsche Bank, the bank’s co-CEO John Cryan wrote a memo to employees saying the bank was “rock solid” and that its capital position was “strong.”

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August 27, 2016 - Posted by | Economics | , , , , ,

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