Deutsche Bank: European Central Bank Counted Money That Wasn’t There in Stress Tests
Oct. 12, 2016 (EIRNS)—While it’s well known that nothing the European Central Bank says can be believed, new revelations are always coming out to confirm that fact. The Financial Times reported that the European Central Bank (ECB) gave Deutsche Bank an unprecedented special treatment during its stress test, counting reserves that were not in the bank!
This European-style creative auditing involved counting the sale of Deutsche Bank’s stake in the Chinese money house Hua Xia before the deal was even concluded. The deal had been announced by board chief John Cryan in December 2015 which would supposedly allow the bank to invest €3.2 to €3.7 billion to push up its capital ratio by 0.4 percentage points. But to this day, the sale has not been completed. Nevertheless, the ECB took the non-sale into consideration for the stress test—even though the deadline for the settlement of such transactions had expired by the end of 2015.
With this maneuver, Deutsche Bank showed a core capital ratio of 7.8%. Without the deal, it would have shrunk to 7.4%.
But even the bankers are not fooled, since Deutsche Bank is paying higher rates to borrow from other banks than even Italian and Greek banks. According to Euribor data released yesterday, Deutsche is the only bank to pay to borrow over a 9- or 12-month period, of a group of 21 lenders polled to determine the price of interbank borrowing for the broader sector.
This puts Deutsche Bank behind Italy’s Monte dei Paschi or the National Bank of Greece! This exposes the reality, that despite the ECB’s free money to borrow for nearly all banks—it cut its deposit rate below zero and pumped more than one trillion euros into the market—Deutsche Bank still had to pay 0.02% to borrow money from its peers over nine months. It paid 0.06% for a year-long loan. Although the charges are small, all other 19 banks in the panel, including BNP Paribas, Barclays Bank and Crédit Agricole, are, in effect, paid to borrow for that period.