If you look at Deutsche Bank’s recent news coverage, a serious questions needs to be asked: Is it possible that Deutsche Bank could trigger the downfall of the global banking system? Deutsche Bank is viewed by some analysts as the black swan of the banking system. Lehman Bros. had assets of $639 billion before they filed for bankruptcy in 2008. Today Deutsche Bank has assets valuing $1.7 trillion. However, its income has plummeted 80% since 2017 - this is quite worrying. Is this bank going to go bankrupt? The United States Federal Reserve Bank has already declared the bank’s operations in the US as troubled.
If Deutsche Bank were to file for bankruptcy, it could create a trickle-down effect. Its downfall could bring down a number of other banks that rely heavily on Deutsche Bank’s investment. The bank has already being cautioned by the Federal Reserve Bank back in 2014, 2015, 2016, and 2017, however the company’s management failed to address any of these warnings. Since the Bank’s stock declined, the S&P has downgraded the bank to a BBB+ rated bank instead of an A- ranking.
One of the biggest problems Deutsche Bank is facing is inconsistent leadership. The bank was criticized worldwide in 2016 when it was accused of fixing silver prices at the expense of silver investors. The Bank agreed to a settlement of $38 million with US prosecutors. According to the Bank’s CEO Sewing, the Bank will reemerge as a strong financial institution. He believes in the inherent strength and organization of the Bank’s team. Just a few days after this optimistic statement the company’s stock dropped by 5%.
In 2017 Deutsche Bank’s losses were valued at 497 million Euros. This far exceeded the Reuters prediction of a loss of 290 million Euros. In order for the Bank to survive, significant changes will need to be implemented as quickly as possible. Up until now the German government has not mentioned bailing out Deutsche Bank, however this could change in the next several months. After all, Deutsche Bank is the largest bank in Germany. Should the Bank collapse, the government may also have the option to take control of the bank.
Deutsche Bank is not the only bank at risk of collapse in Europe. Many European banks are overvalued and weighed down by debts.
In 2016 details of Deutsche Bank’s silver price fixing were publicized. Since then, many investors have lost confidence in the Bank. It became apparent that Deutsche Bank was conspiring with other banks to profit off of other investors by fixing silver prices. This information was publicized through US investigations.
As previously stated, the German government may be interested in providing assistance to the Bank so that it may regain its position as a strong financial institution. However, the bank’s management needs to make a lot of changes in order to earn back the trust of its investors worldwide. Deutsche Bank is undoubtedly Germany’s largest bank, and it operates in dozens of countries worldwide. The future of Deutsche Bank is likely to be placed in the hands of the German government.
As the global economy appears to be approaching another economic recession, the German government has shown more interest in gold. Gold is one of the most dependable hedges against inflation - recently the Bundesbank in Germany has repatriated $31 million worth of gold ahead of schedule.