Is Another European Banking Crisis Imminent?

Is Another European Banking Crisis Imminent? (Source thetrumpet.com)

Germany’s most important bank and Italy’s entire banking system seem on the brink of total meltdown. Europe’s banks are in huge trouble—sitting on the brink of triggering not just a European crisis, but a global one. Leading the way is Germany’s Deutsche Bank. Germany’s most prestigious and influential financial institution is on the brink of disaster. Its share price has gone from nearly €120 (US$133) a share before the 2008 financial crisis to nearly €12 a share today—a 90 percent drop. The bank has been fined $2.5 billion for manipulating the LIBOR rate. It was forced to spend $8 billion on litigation. It owns $46.5 trillion of derivatives. The bank lost $7.4 billion last year. Its chief financial officer has said he expects bank losses to continue until 2018 at the earliest. This year, it seems set to lose even more than in 2015. It’s no wonder, then, that the International Monetary Fund (IMF) recently declared Deutsche Bank the most dangerous bank in the world. Among globally systemically important banks, “Deutsche Bank appears to be the most important net contributor to systemic risks,” the IMF wrote in a report published on June 30. The United States Federal Reserve recently found that the American branch of Deutsche Bank and the U.S. arm of Spanish bank Santander were the only banks to fail its stress tests. The bank is teetering on the brink of bankruptcy. It has $1.82 trillion in assets and $1.75 trillion in liabilities. With just a slight shift of a few percentage points, the bank is literally less than worthless. To make matters worse, Deutsche Bank is at the foundation of Germany’s entire economic system.

 

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