Deutsche Bank shares have fallen sharply on the news that German Chancellor Angela Merkel won’t bail-out the struggling bank, with shares falling by as much as six percent in early Monday trading, making it the worst performance since 1992. Since January, the bank’s shares have lost over 52 percent of their value.
Merkel also refused to provide financial assistance to Deutsche Bank in its legal battle with the U.S. Department of Justice. The chancellor made her position clear during talks with Deutsche CEO John Cryan, according to Focus magazine. The German-based lender may be fined up to $14 billion over its mortgage-backed securities business before the 2008 global crisis.
The German Chancellor also noted that Deutsche Bank will not be getting a bailout from the European Central Bank – the lender of last resort for European banks.
So could Germany be considering a bail-in instead of a bailout?
According to Investopedia:
A bail-in is rescuing a financial institution on the brink of failure by making its creditors and depositors take a loss on their holdings. A bail-in is the opposite of a bail-out, which involves the rescue of a financial institution by external parties, typically governments using taxpayers money. Typically, bail-outs have been far more common than bail-ins, but in recent years after massive bail-outs some governements now require the investors and depositors in the bank to take a loss before taxpayers.
So the question becomes; are millions of Germans about to see their savings stolen by the government to prop up Deutsche Bank?
It’s not at all beyond the realm of possibility, as it has happened before in very recent history. To keep the bank solvent, the Bank of Cyprus took almost 40% of depositor’s funds – leaving customers with essentially nothing they could do about having their money stolen. Assets were frozen and ATM machines were not refilled.
Perhaps this explains why in mid-August Germans were told by their government to stockpile 10 days worth of water, and 5 days worth of food in case of a “national emergency” hitting the country.
Deutsche Bank’s unbelievably risky portfolio and it’s exposure to the derivative markets, which stands at over $40 trillion dollars, would undoubtedly cause exponentially more damage than the Lehman Brothers collapse did back in 2008, which precipitated the Great Recession of 2008.
Read more: 8 Years After US Banking Collapse, Implosion of Megabank Poised to Decimate the Global Economy
Merkel also refused to provide financial assistance to Deutsche Bank in its legal battle with the U.S. Department of Justice. The chancellor made her position clear during talks with Deutsche CEO John Cryan, according to Focus magazine. The German-based lender may be fined up to $14 billion over its mortgage-backed securities business before the 2008 global crisis.
The German Chancellor also noted that Deutsche Bank will not be getting a bailout from the European Central Bank – the lender of last resort for European banks.
So could Germany be considering a bail-in instead of a bailout?
According to Investopedia:
A bail-in is rescuing a financial institution on the brink of failure by making its creditors and depositors take a loss on their holdings. A bail-in is the opposite of a bail-out, which involves the rescue of a financial institution by external parties, typically governments using taxpayers money. Typically, bail-outs have been far more common than bail-ins, but in recent years after massive bail-outs some governements now require the investors and depositors in the bank to take a loss before taxpayers.
So the question becomes; are millions of Germans about to see their savings stolen by the government to prop up Deutsche Bank?
It’s not at all beyond the realm of possibility, as it has happened before in very recent history. To keep the bank solvent, the Bank of Cyprus took almost 40% of depositor’s funds – leaving customers with essentially nothing they could do about having their money stolen. Assets were frozen and ATM machines were not refilled.
Perhaps this explains why in mid-August Germans were told by their government to stockpile 10 days worth of water, and 5 days worth of food in case of a “national emergency” hitting the country.
Deutsche Bank’s unbelievably risky portfolio and it’s exposure to the derivative markets, which stands at over $40 trillion dollars, would undoubtedly cause exponentially more damage than the Lehman Brothers collapse did back in 2008, which precipitated the Great Recession of 2008.
Read more: 8 Years After US Banking Collapse, Implosion of Megabank Poised to Decimate the Global Economy
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