Deutsche Bank Will Draw the City of London Down with It
Sept. 27, 2016 (EIRNS)—Deutsche Bank’s share price tumbled another 7.5% to €10.55 on Monday, dragging it down to a level not seen since the mid-1980s. The share price drop occurred after Angela Merkel reportedly claimed that the government would not intervene to save the bank before the national elections, scheduled for next year. This follows uncertainty about the $14 billion fine the U.S. Department of Justice want to impose on Deutsche Bank. Britain’s Guardian reports that there are other issues Deutsche Bank faces, including potentially expensive inquiries into alleged currency manipulation, precious metals trading, and billions of dollars of funds transferred out of Russia.
When Deutsche Bank blows, it will take the City of London with it. The shares of Lloyds Banking Group, Barclays, and Royal Bank of Scotland are taking a hit over Brexit and facing fines. Some analysts warn that RBS could face a $12 billion penalty.
"Talk of a hard Brexit has not been welcomed by the market," said Nicholas Hyett, equity analyst at financial firm Hargreaves Lansdown.
The Motley Fool’s Rupert Hargreaves warns that if [sic] Deutsche Bank’s derivatives book takes a hit,
"the systematic damage could be unprecedented as it would leave the other leading European banks such as Barclays with a large hole in their balance sheets."
The similarities between Barclays and Deutsche Bank include the former also being stuck with huge fines from regulators, a high cost base, and a lack of confidence among investors.
"for the time being, Deutsche’s problems may be the focus of the financial world but Barclays is facing similar pressures and a collapse in Germany could quickly spread to the U.K.,"
opines the Guardian.