Although Deutsche Bank satisfies all capital requirements and is en-route to execute their future plans, there is a lot of uncertainty for the systemic bank. Since early 2016, the value of Deutsche Bank stock was halved. Investors see dark clouds for the bank that was involved in multiple financial scandals.
Other reasons for the heavy crosswind Deutsche Bank experiences is the current economic climate, the implementation of new systems and the ongoing reorganisations due to technical progression. This is not in favour of commercial banks with low ECB interest rates and high cost to implement new and severe compliance regulations.
The final push came last week where the U.S. Department of Justice plans to fine Deutsche Bank over its role in the global financial crisis, and more specifically for selling mortgage-backed securities in the USA. Initially the U.S. Department of Justice presented a 14 billion USD claim to settle. This made investors and politicians around the world nervous.
At the end of the trading week news came out that Deutsche Bank is close to settle for a far more favourable amount of 5.4 billion USD. Still considerable, but much better as the initial 14 billion USD. The question though is if investor confidence keeps up and the ‘bears’ stay out.
Deutsche Bank is a systemic bank. It is considered to be too big to fail. A systemically important financial institution (SIFI) is a bank, insurance company, or other financial institution whose failure might trigger a financial crisis. Due to the banks size and entanglement around the world, the fall of the bank can create another financial crisis with even further consequences than the financial crisis of 2008.
To calm down the banks staff, CEO John Cryan, published an internal memo on Friday. Cryan sees sees no reason for speculation because the bank fullfills all capital requirements. Furthermore, there are powers in the market that want to undermine the confidence in the bank. There are a few hedgefunds that reduce their stake in Deutsche Bank. However, the bank works with approximately 800 of these investment firms. According to Cryan’s statements.