Posted on 09/29/2016 7:40:50 PM PDT by drewh
Hedge funds have started to pull some of their business from Deutsche Bank, setting up a potential showdown with German authorities over the future of the country’s largest lender.
As its shares fell sharply in New York trading, Deutsche recirculated a statement emphasising its strong financial position.
European regulators and government officials have kept a low profile in public over Deutsche’s deepening woes. However, in private they have struck a sanguine tone, stressing that in extremis there is scope under European regulation to inject state funds to support the bank, provided it is done in line with market conditions.
Marcel Fratzscher, head of DIW Berlin, a think-tank, said: “If push comes to shove, the German government would contribute because Deutsche Bank is the only global bank that Germany has.”
A person briefed on the situation at Deutsche said some of the bank’s hedge fund clients had imposed risk limits on the business they do with it in response to the negative headlines swirling around the lender and the recent rise in its credit default swap prices, a key indicator of credit risk.
Deutsche has become the focal point of growing anxiety about the health of Europe’s banking system after the US Department of Justice told the bank it was seeking $14bn for mis-selling mortgage-backed securities.
(Excerpt) Read more at ft.com ...
There’s a bad moon on the rise.
Fridays at the end of the month in fall are rough days
for the market
Deutsche Bank is by far the largest bank in Germany. The German government will not allow it to fail, no matter what.
Germany will keep them afloat, and do it quietly, out of the spotlight. That is their way.
Yesterday morning (Thur), the general plan on the table was that the gov’t would BUY around a quarter of the bank, with something in the range of 12-to-15 billion Euro (stock prices are low enough to make this attractive). They need to make it through the period of paying off the US fine, and in three years....they might return to profitability and the government could sell their shares and actually make a profit on this.
However, last night, an interesting thing occurred. Erdogan, the Turkish PM, stood up and said that Turkey might buy the whole bank. Maybe he is bluffing or trying to force the Germans to buy the whole bank. No one knows. Turks could do this but it’d take a heck of a lot and no one knows the intentions here with Turkey.
Note, there is a EU rule in effect that a EU country can’t just give money or give an interest-free loan....to a bank to help it survive. So buying the shares of a bank is the only way to get into this business.
You’re goin’ down Fritz.
Fair enough, but didn't the gov't force banks to offer those mortgages to people who clearly could never pay back the loans in the first place?
Germany and France don’t have to obey any EU rules. If Germany wants to bail out DB, they will do it. Anybody got a problem with that?
Right now, there’s a big-time bank in Italy which will fail unless the gov’t there pumps in fresh cash. The EU has been holding that funny rule over their heads for weeks now. I think that’s why Germany has not acted so quickly on this episode. It was a stupid rule when started but they’ve all forced the rule to continue for some odd reason.
>>Deutsche Bank is by far the largest bank in Germany.
And it was the primary warehouse lender for Ameriquest/Argent Mortgage.
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