The anxiety in the markets is back. This time to Deutsche Bank account. When uncertainty Institutions or companies that have long been suspected or suspected by investors are subject to large sales. This affects the industry as a whole. That’s what happened this Friday, when the panels were painted red once again, with bank values as the main victim.
Why is Deutsche Bank sinking in the stock market?
as with Credit SuisseInvestors’ eyes turned to this Friday. German bank, the main German bank. That’s what happened last week, forcing its main competitor, again, to buy Credit Suisse by Swiss. UBS, meanwhile, was penalized in the stock market this Friday. The thing is, the Thursday night price default insurance (CDs) from the German bank. These titles are derivative instruments that provide security against the default risk of the bond or debt issuer. The CDS buyer acquires the right to sell the bond at face value. All taken into account an important indicator of credibility While this development, which assumes that a company’s Non-Payment risk has increased, was recorded, Deutsche Bank’s shares began to decline, which brought down the entire European banking system. In the case of Credit Suisse, the biggest cause for concern was that those investing in convertible high-yield bonds (‘coconuts’) saw that the 16,000 million-worth of securities created to strengthen banks’ capital cushions were worth zero euros. shareholders got back some of their investments by exchanging shares with UBS, which is the opposite of the practice advocated in the eurozone.
Why focus on this German bank?
It is an untrusted financial asset, as in Credit Suisse. Deutsche Bank has long struggled to clean up its balance sheet recently. a rather weak bank after years of losses and declining profitability. The business has received fines for manipulating mortgage indices such as LIBOR (2015) and sanctions for collaborating in money laundering operations (2018) or for business dealings with pedophile Jeffrey Epstein (2020) and bribery in the foreign exchange market (2021). . Similar to Credit Suisse, reputational damage has a long history. All in all, it had some good results last year, but that doesn’t seem to be enough to calm the markets as the storm has already broken since the fall of American Silicon Valley Bank and Signature Bank and the First Republic’s private bailout.
Why is Deutsche Bank important?
Deutsche Bank is included in the list of 30 systemic banks worldwide, which is prepared by the Financial Stability Board (FSB) and the Basel Committee every November and also included in Credit Suisse. The German bank, along with Bank of China, Barclays (UK), BNP Paribas (France), Goldman Sachs (USA), Industrial and Commercial Bank of China, is in the group of entities that require 1.5% additional capital to face the crisis. China and Mitsubishi UFJ FG (Japan). This list gives a percentage of the additional capital required. The lowest is 1% and Santander is included, followed by 1.5%, 2%, 2.5% and 3.5% with no assets.
What happens to the bank’s non-payment insurance?
Deutsche Bank’s CDS, or credit default insurance, rose sharply and hit all-time highs. This development shows that investor tension and distrust is focused on the German bank as collateral becomes more expensive against possible defaults by bondholders; this is an indicator that determines whether an organization is close to failing to meet its obligations. creditors. This situation has infected the entire industry.