Saturday, October 1, 2016

More Woes for Deutsche Bank

Deutsche Bank is making lots of news these days and not the good kind. Since DB does own a huge derivatives book and even the IMF has warned that it is a bank large enough to create systemic risk, readers should keep an eye on how the current situation with DB is resolved. Meanwhile, Bloomberg runs this new article about former DB executives being charged with market manipulation which won't do much to inspire confidence over in Europe. Below are a few quotes.

"Six current and former managers of Deutsche Bank AG -- including ex-asset and wealth management head Michele Faissola -- along with former executives at Nomura Holdings Inc. and Banca Monte dei Paschi di Siena SpA were charged in Milan for colluding to falsify the accounts of Italy’s third-biggest bank and manipulate the market.
A judge in Milan approved a request by prosecutors to try 13 bankers on charges over separate derivative transactions Paschi arranged with the securities firms, said a lawyer involved in the case, who attended the closed-door hearing Saturday, where the decision was announced.
The charges deal another blow to Deutsche Bank, which is seeking to reassure investors and clients that it will be able to withstand pending U.S. penalties over the bank’s sale of mortgage-backed securities and its dealings with some Russian clients. Monte Paschi, the world’s oldest bank, restated its accounts and has been forced to tap investors twice to replenish capital amid a surge in bad loans and losses on derivatives. It’s now attempting to convince investors to buy billions of soured debt before a fresh stock sale."
My added comments: We have commented for a long time here about the potential for too big to fail entities with large derivatives books to be a systemic risk. Here is an earlier blog article along those lines.

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