Deutsche Bank again in the middle of the US-EU economic skirmishes

Deutsche Bank Towers – Headquarters in Frankfurt am Main, Germany. Taking a look into the lobby. (Deutsche Bank Audiovisual Service).

Deutsche Bank Towers – Headquarters in Frankfurt am Main, Germany. Taking a look into the lobby. (Deutsche Bank Audiovisual Service).

The US government is reacting in many ways against the fine in back taxes of €13 billion which the European Commission imposed on Apple. Firstly, Jack Lew, the American Secretary of the Treasury, accused the EU of grabbing tax incomes which belong to the US. On 31st August he said, “What’s not appropriate is for, in the name of state aid, Europe to be rewriting tax law retroactively, reaching into a tax base that properly should be a U.S. tax base, because it’s U.S. income, and doing it in a way that I think ultimately will hurt the business environment because it’s going to create uncertainty in Europe.”

Lew went on to threaten the European Union through a very strong answer to EU Competition Commissioner Margrethe Vestager‘s comments. She said that she is just making sure each of the 28 member states gets equal treatment in the EU. Her EU Commission department is responsible for the huge tax penalty on Apple. According to Reuters, “Jack Lew urged her to reconsider her investigations because they risked creating disturbing precedents”. It seems that the Americans are now realizing those threats.

Deutsche Bank Again

Last Friday, the US Department of Justice asked the American subsidiary of the largest German lender, Deutsche Bank, to pay a colossal fine of $14 billion. Allegedly, the bank was wrongfully implicated in the 2008 breakdown of the US financial markets, which triggered the then world crisis. Of course, this is just the opening bit of the US Department of Justice and Deutsche Bank is expected to come up with a proposal. According to sources, the lender expected a settlement between $2bn to 3bn.

Quite possibly, the size of the opening fine by the US Department of Justice precludes a settlement as low as the Bank expects. In the case of J.P.Morgan and the Bank of America, the Department opened the negotiations with a penalty of $20bn on each one. The final settlement was reached at $13bn for the former and $17bn for the latter bank. This means Deutsche will probably be pressed to go very close to or possibly above a double digit figure.

Can it pay?

In view of all that, the German lender has set aside around $5bn to pay for possible litigations. Apparently, the US Department of Justice is not the only case that Deutsche has problems with. Simple arithmetic tells us then that the bank will find itself in a very difficult situation, if the Americans continue pressing hard over the size of the fine. Under this light, it will be rather clear if the US wants to really engage the EU in a farfetched economic confrontation or not.

At this point, it must be reminded that last year, the French mammoth bank BNP Paribas was forced by the American authorities to pay a fine of $9.5bn. This was about alleged dealings with Iran and Cuba at the time when such transactions were illegal in the US. A few months later, the US started lifting the embargo on Iran and restored diplomatic relations with Cuba.

More EU banks to be fined

In any case, according to US mainstream financial media, Deutsche is not the last European bank being investigated and surely to be penalized. The list comprises the Royal Bank of Scotland, Union de Banques Suisses (UBS), Credit Swiss and Barclays. If this is so, the largest European banks will be held accountable in the US, on grounds that are yet to be known.

A capital issue

Coming back to Deutsche Bank, this last hideously oversized penalty in the US my cause a lot of pain not only to this bank, but to the entire EU. For months now this German lender has been targeted by the American authorities with leaks to the press ‘revealing’ the weak points of the bank, mainly regarding capitalization. The worst blow came from the Washington based International Monetary Fund, which called Deutsche the biggest risk in the global financial system.

In this way, the Americans have blocked the ability of the bank to increase its capital in the market. It seems the situation is rather desperate, to the extent that some weeks ago, Deutsche’s chief economist, David Folkerts-Landau, said that the Eurozone banks need €150bn in total from taxpayers to adequately recapitalize. What he must have in mind, without mentioning it, is that a good part of this huge amount has to be directed to the coffers of his employer.

Eurozone banks need more

It’s a fact then that the euro area banks are very poorly, if not dangerously inadequately capitalized. On top of that, it’s rather impossible to mobilize enough investors in the open market, to risk their money with them. Obviously, the Americans are currently trying, if not take full advantage of the difficulties of the European banks, at least to exploit this problem for their own interests. In this context comes the long studied Brussels initiative to corner some more US giants like Google, Amazon and McDonald’s on accounts ranging from tax avoidance to exploitation of dominant market position.

Undoubtedly, the US-EU confrontation has just started and it is not clear where it will end up. The determinant of that will be the progress of the much advertised trade deal between the two sides, the, by now infamous, Transatlantic Trade and Investment Partnership (TTIP). If the Americans sense that the deal is going to die, they will be a lot more aggressive than currently. This is an indirect proof that the TTIP will be to the detriment of Europeans and is to help only the multinationals, of which he US has the lion’s share.

the sting Milestone

Featured Stings

Can we feed everyone without unleashing disaster? Read on

These campaigners want to give a quarter of the UK back to nature

How to build a more resilient and inclusive global system

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

Powering through the pandemic

Draghi hands over to banks €77.7 billion more

Syria: At least seven children killed in yet another airstrike

FROM THE FIELD: A UN peacekeepers-eye view of DR Congo

How can we make entrepreneurship serve the greater good?

South Africa’s SMEs should be first in line for a digital upgrade

Energy: EU priority projects should be aligned with 2050 climate objectives

European Commission Joint Research Centre opens world-class laboratories to researchers

India is a latecomer to AI. Here’s how it plans to catch up

Quality of air in Bucharest-Romania: is it fog or is it smog?

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

Chart of the day: The internet has a language diversity problem

Hydrogen isn’t the fuel of the future. It’s already here

Cocaine and opium production worldwide hit ‘absolute record highs’ – major threat to public health says UN study

India: step up reform efforts to increase quality jobs and incomes

Trade preferences boost developing countries’ exports to the European Union

How can you or your organization support the Hour of Pride initiative?

Migration: Commission takes action to find solutions for unaccompanied migrant children on Greek islands

Cash-strapped cities must look to private partners

Scotland “shows the way” to separatist movements as Catalonia calls a vote on independence

Tuesday’s Daily Brief: Venezuela-Colombia baby breakthrough, Italy piles on rescue boat pressure, States must combat hate, Kashmir rights latest and a musical plea to combat CAR hunger

The Parliament accuses core EU countries of exploiting their dominant political position

EU and African leaders to jointly tackle the migration crisis across the Mediterranean

Wednesday’s Daily Brief: #NoTobacco Day, China’s economy, family farming, #ClimateAction

How AI and satellite imaging can stamp out modern slavery

Trump’s Russian affair spills over and upsets Europe

UN boosts humanitarian appeal to help tackle Zimbabwe’s ‘worst-ever’ hunger crisis

UN Children’s Fund chief condemns ‘horrific’ Kabul bomb attack

4 things President Trump could learn from Jimmy Carter

Blockchain will make sure green pledges aren’t just greenwash: a new initiative by young leaders at the World Economic Forum

Connected Claims returns to London in 2018

India m2m + iot Forum Hosts Successful 4th Editions of India Smart Cities Forum and India Smart Villages Forum

Australia wants to build a giant underground ‘battery’ to help power the nation

A Sting Exclusive: “The challenge of Society’s digital transformation”, Spanish Minister of Spain for Industry, Energy and Tourism José Manuel Soria live from European Business Summit 2015

The EU Parliament backs the ‘Right2Water’ initiative all the way through

New Disability Inclusion Strategy is ‘transformative change we need’, says Guterres

The European Sting live from the World Economic Forum 2015 in Davos

‘We face a global emergency’ over oceans: UN chief sounds the alarm at G7 Summit event

Confirmed ‘Blue Line’ tunnels ‘do not appear’ to surface in Israel – UN peacekeeping chief

‘We need to do more’ to transform the world, deputy UN chief tells African audiences

Increased levels of carbon dioxide could reduce brainpower, study finds

COP21 Business update: Companies urge now for carbon pricing as coal is still a big issue

Far more needed to ‘confront the world’s climate emergency’, UN chief tells ASEAN Summit

Palm Oil: With Malaysia cracking down on production, what’s the alternative?

Female leaders warn about the erosion of women’s rights

New identity cards deliver recognition and protection for Rohingya refugees in Bangladesh

6 ways social innovators are responding to the COVID-19 pandemic

Trade with the United States: Council authorises negotiations on elimination of tariffs for industrial goods and on conformity assessment

How bad could British healthcare get for its citizens abroad post-Brexit?

Does Indonesia have the world’s most complicated elections?

Why developing new antibiotics is a matter of life and death

Trade: EU and 16 WTO members agree to work together on an interim appeal arbitration arrangement

4 ways to cyberproof your business during mergers & acquisitions

The EU risks trade relations with China over the Tata hype about steel

Security Council condemns attacks on Afghan security forces which killed at least 27

Methane levels are increasing – and scientists aren’t sure why

How will the EU face the migration crisis when the Turkish threats come true?

Parmesan cheese on shelves in Italy (Copyright: European Union, 2014 / Source: EC - Audiovisual Service / Photo: Daniela Giusti)

CETA at risk again: Italy says it won’t ratify EU-Canada trade deal over product protection fears

Why impoverishment and social exclusion grow in the EU; the affluent north also suffers

Strong multilateral institutions key to tackling world’s dramatic challenges, UN chief says In Moscow

More Stings?

Advertising

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