Everyone is denying everything.
Judging by the slow-motion meltdown of a growing number of large banks in Europe, including Deutsche Bank (in the IMF’s words, the “world’s most important net contributor to systemic risks”), confidence in their solvency is evaporating. And the denial and blame games have begun.
Deutsche Bank CEO John Cryan denied any need to raise capital or ask for a bailout. That was followed by furious denials from Mario Draghi that the ECB’s low rates are partly responsible for Deutsche Bank’s current woes. Roughly half of all of Deutsche’s profits have traditionally come from loan interest; now, thanks to the madcap negative-interest-rate policies, that source of income is disappearing.
But the bank’s spectacular fall from grace — it has lost 90% of its market value since 2007 — is primarily owed to woeful, often criminal mismanagement. Hence, all the fines. As the WSJ’s Paul J Davies writes:
The bank faces all the problems that plague its peers, but it has most of them worse than rivals. Its costs are among the highest, its balance sheet among the most bloated and its longer-term profitability one of the least attractive.
Lies, Damned Lies and Contradictions
Things are so serious and the denials are flowing so thick and fast that many of the main players are contradicting each other — and sometimes even themselves — at just about every turn…