Deutsche Bank slammed by the US-based trio of IMF, Fed and Moody’s

Deutsche Bank. Overview of the trading floor in Frankfurt am Main, Germany. (Deutsche Bank audiovisual Services).

Deutsche Bank. Overview of the trading floor in Frankfurt am Main, Germany. (Deutsche Bank audiovisual Services).

Last Thursday morning the International Monetary Fund and the American central bank, the Fed, simultaneously but in the face of it independently, issued warnings about the health of the largest German lender, the long ailing Deutsche Bank. A few days before that the US rating agency Moody’s had degraded the creditworthiness of the bank close to the trash region. The firm’s shares fell by 20% during the week after the UK Brexit vote and 45% since the beginning of the year.

The IMF went even further and said that the entire German banking system made up by around 1700 lenders, operating in the country and abroad, needs “improvements in corporate governance, internal audit and compliance functions as well as strengthening regulation of related party risk and major acquisitions”. This last IMF remark about ‘major acquisitions’, is a direct reference to the ongoing efforts of large German business groups, like Bayer, to acquire iconic US businesses like Monsanto.

Deutsche failed Fed’s stress tests

Apparently for such a huge acquisition project Bayer would need active technical and financial advice and support. Obviously such a demanding task will be undertaken by Bayer’s compatriot, the US subsidiary of Deutsch Bank. Exactly at that point the Fed comes in and leaves the American subsidiary of Deutsche out in the cold. According to Reuters the “U.S. units of Deutsche Bank DBKGN.DE and Santander (SAN.MC) suffered the ignominy of failing U.S. stress tests yet again this year…Both banks failed because of poor risk management and financial planning, not for lack of capital, the Fed said”. This is a real humiliation for the German giant, while the problems of the Spanish banking firm Santander are very well known and the group suffers for three years now in all its operations in Europe, South America and the US. There is more to this story though.

The truth is that the European banking system in general has not recovered from the 2008-2010 financial meltdown, while the American banks are now regarded as much healthier. This is because the US authorities, the government and the central bank, after the bankruptcy of Lehman Brothers in September 2008 rushed and injected into the banking system of the country $5 trillion. The money was handed out either as capital participation by the government or as zero cost financing from the Fed.

US banks better supported

With this unbelievable zero cost money bonanza, the American banks managed in a few years to adequately recapitalize. Of course, to accomplish that they did exactly what they had been doing before the crisis; ‘investing’ in every possible and impossible risky markets. Luckily enough until today those bets have turned out profitable and helped the New York money usurpers to recover.

In Europe the banking system didn’t receive the immediate support of the European Central Bank, because Germany didn’t ‘believe’ in the monetary therapy of the crisis and blocked it. Only last year the ECB introduced extraordinary monetary measures to restore the health of the European banking system. To be noted that all along the years before and after the financial crisis many European and US banks alike, with Deutsche being amongst the more active of them, kept expanding their exposure to the dangerous but lucrative derivatives and CDSs markets. Many went bust during the difficult times. There is information going around that Deutsche presently sits on a pile of derivatives and CDSs of anything between $40 and $72 trillions. Seemingly the Brexit vote is now casting a shadow over Deutsche’s exposure to similar risks and the Americans didn’t lose the opportunity to slam the German expansionism to their ‘own’ markets. There is more to it though.

Trash stocks

Some weeks ago the rating agency Moody’s degraded the credit evaluation of Deutsche Bank, from Baa1 to Baa2 and also brushed down its long term creditworthiness for deposits, to A3 from A2. For a banking giant like this German lender, those ratings are not far from the trash region. The agency also commented that the adverse international investment environment and the macroeconomic precariousness are accentuated by the too low interest rate policy of ECB, affecting negatively the largest German banks.

Questioning all German banks

The IMF has inked more negative comments about the entire German banking constellation. It leaves to be understood that the German financial system, in which Deutsche Bank is the key chain-link, constitutes a risk for the entire world. It blatantly states “outside influences can affect developments in Germany, and what happens in the German financial system can have major repercussions around the world. This potentially global impact makes risk management, intense supervision of systemic institutions and the close monitoring of their cross-border exposures particularly important”.

In short the IMF tells the German and the other European watchdogs and auditors of the financial sector, that they should do more to better protect the world from a German crisis. In reality it tells them they aren’t doing enough, so Germany actually constitutes a danger for the world. Of course not a word about the New York banking ‘parties’ of the past or the present.

Deutsche Bank hand picked

The Fund also identifies potential sources for worldwide problems by stating that “Germany is also home to global systemically important institutions, including the insurer Allianz SE, the bank Deutsche Bank AG, as well as the clearing house Eurex Clearing AG, which provides services to almost 190 clearing members from a large number of countries. This creates an additional layer of international interconnectedness”.

The use of the term ‘interconnectedness’ is very crucial in this analysis, because it refers to the channels of crisis diffusion. In short the IMF informs the world that Germany, who boasts about its financial and fiscal orthodoxy, may in reality be a time bomb for the global financial system. If this is not a direct Washington assault against Berlin then words have lost their meaning.

Containing Germany

But why the US should want to molest Germany? It doesn’t take much geopolitical thinking to understand, that the US feels obliged to contain the German expansionism in Europe and the world. Let’s see this issue from a different angle. Over the past few years Washington, helped by London and Paris, did what it takes to ostracize Moscow from Europe. The wars in Ukraine and Georgia, the missiles in Poland, the Czech Republic and Romania and the economic quarantine imposed on Russia, are enough proofs that the US wants Russia economically and politically locked out from Western Europe. The Americans by their direct political influence if not control on Poland and Ukraine have practically erected an Iron Wall separating Western and Central Europe from Russia.

It’s Germany however the country that has the most to lose from this separation. The Russian abundance of natural resources and the German capital and technology, if put together could soon threaten the American hegemony of the world. On top of that Germany is challenging the US even on American soil. The latest incident is the offer by Bayer to acquire Monsanto. All those developments oblige the Americans to focus on Germany and try to contain its economic and political supremacy in the EU. After Brexit there are more reasons for that.

Brexit makes it more imperative

Britain is going to need now all the American help it takes, to confront the German obstinacy regarding the future relation of the UK with the EU, if the UK remains united after all. To be noted that Brussels has already started to support the Scottish flare for independence. The US from its side wants Britain to remain as influential as ever in the European affairs, but to achieve that the German resistance needs to be overcome.

Washington has more to blame Berlin for. Everybody remembers the hard time the US Secretary of Finance Jack Lew had with his German counterpart Wolfgang Schäuble. Germany refuses obstinately to cooperate with the US in the way the West is collectively managing its financial affairs. Washington is fuming about that. Besides, the German opposition to forgive a part of the Greek debt has infuriated both the White House and the IMF.

US want Germany to spend

Understandably the US wants Germany to spend a good part of its large reserves, not to acquire prime American assets like Monsanto, but to finance the revival of the Western economic volume, by supporting consumption and infrastructure investments in Europe, and why not buying American defense systems.

Probably there is a lot more to it, but it has not been made as obvious as the facts counted here above. In any case the truth is that Washington is not stepping in the vacuum. There is a lot of ground to castigate Germany about and the Americans are meticulously taking one step after the other. Deutsche Bank and Volkswagen are certainly the most famous cases.

Advertising

Advertising

Advertising

Advertising

Advertising

Advertising

the European Sting Milestones

Featured Stings

Stopping antimicrobial resistance would cost just USD 2 per person a year

Cameron’s “No Brexit” campaign wins top business support as Tory front breaks

Seaweed, enzymes and compostable cups: Can ‘Big Food’ take on plastic and win?

A new European banking space is born this year

The EU Consumer Policy on the Digital Market: A Behavioral Economics View

Low quality healthcare is increasing the burden of illness and health costs globally

Can the US deal a blow to EU and Russia together over Ukraine?

Do men and women really have different leadership styles?

The German banks first to profit from public subsidies of trillions

How leaders can use ‘agile governance’ to drive tech and win trust

Right2Water initiative: Is the Commission ready to listen to citizens?

Removing sweets from supermarket checkouts could help fight obesity

EU budget: Commission proposes to increase funding to support the environment and climate action

EU-China relations under investigation?

UN Security Council urged to act against ‘worst-case scenario’ Syria’s war-battered Idlib

Costa Coffee products (Copyright: Costa Coffee; Source: Costa Coffee website, Press area)

The start of the “Caffeine rush”: Coca-Cola acquires Costa Coffee days after Nestlé-Starbucks deal

‘Time is of the essence’ for refugees on Greek islands – UN agency

The JADE Spring Conference 2017 is casting its shadows before

EU Migrant Crisis: Italian Coast Guard Headquarters and Italian Navy to give host national opening addresses at Border Security 2016 in Rome

COP21 Breaking News_04 December: Launch of CREWS, climate risk & early warning systems

Feeding families remains complex task in war-torn Syria – UN relief agency

FROM THE FIELD: How the smell of fresh bread transformed one refugee life

ECB: The bastion of effective and equitable Europeanism keeps up quantitative easing

High-technology manufacturing saves the EU industry

EU: The Member States to pay for national banking problems

MWC 2016 LIVE: Mobile World Congress shows off planes, trams and automobiles

Is deflation a real danger for Eurozone?

To Brexit, or not to Brexit…rather not: 10 Downing Street, London

A Sting Exclusive: “Delivering on the Environmental Dimension of the new Sustainable Development Agenda”, Ulf Björnholm underscores from UNEP Brussels

EU budget: the Common Agricultural Policy beyond 2020

Saudi Arabia: UN experts push for prompt release of women human rights defenders

Finally an answer to the hottest question of European youth today: How to make sure Juncker’s Investment Plan works for youth

UN gender agency hails record-breaking number of women in new US Congress as ‘historic victory’

MEPs to vote on overhaul of road transport rules in July

YO!FEST ENGAGES 8,000 YOUNG EUROPEANS IN FUTURE OF EU

Youth2030: UN chief launches bold new strategy for young people ‘to lead’

Parliament compromises on Banking Union but sends market abusers to jail

The succesful cooperation

Polish PM chooses to focus on economy, amid questions on rule of law in Poland

Education and Training: where do we stand in 2014?

What makes America the world’s most competitive economy?

Sustainability, peace, security ‘best guarantee against instability’ Guterres to Security Council

What we need for a better European Solidarity Corps

G20 LIVE: World Leaders in Turkey for G20 Summit. Global Economy will be discussed in Antalya

How will Brexit affect higher education in the EU?

The New Year 2016 will not be benevolent to Europe

The US bugged Europe: Is this news?

EU should promote immigration as a humanitarian issue in order to provide a more permanent solution

The European Parliament fails to really restrict the rating agencies

Drowning in the Mediterranean this summer? Many happy returns

Cyber defence: MEPs call for better European cooperation

Is Eurozone heading for disinflation?

The US + Britain trivialize mainland Europe, NATO and the EU

5G mobile is nearly here – but we should share networks to make it affordable

Women’s rights in Asia – how far have we come?

Trying to cure bank cancer with analgesics

Migration Crisis: how to open the borders and make way for the uprooted

Data show EU Economy in a stubbornly subdued state

MEPs propose more transparent legislative drafting and use of allowances

The next EU President will first have to drink his tea at Downing Street

European Union: From financial consolidation to deeper political division

More Stings?

Speak your Mind Here

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s