It’s Not Brexit But “Deutsche-it” You Want to Worry About

Deutsche Bank is a filthy, systemically dirty bank but a bank which the German state is going to save. Using taxpayers’ money.

By David Malone and cross-posted from his blog, Golem XIV

While everyone is endlessly told about the world-ending dangers of Brexit, I wonder if we should be paying a little more attention to “Deutsche-it”.  If the UK leaves the EU the EU will survive.  But what happens when – and surely it’s no longer if – but when Deutsche Bank, Germany’s biggest and only truly global bank has to be rescued? What will the fallout from that be?

I am sure the German authorities will claim its not a rescue its a merger. Yeah right!  It’s a rescue. Deutsche Bank’s shares have fallen 48% in just the last 12 months – the same time the management said they were going to have the bank turned around. The bank’s shares are now worth no more than they were nearly 40 years ago. Which is not such good news.

But there’s worse. While, and perhaps in part because(?) Deutsche Bank’s share price has been in free-fall,  Deutsche Bank has been money laundering around the world. That corruption is now beginning to catch up with the bottom line that it had been pumping cash into for so long.  Deutsche is being investigated after the Panama papers revealed its roll in industrial scale tax avoidance and money laundering. No sooner had the ink dried on that headline when the revelations about Deutsche Bank’s central role in laundering money through Danske bank drew yet more investigators to its HQ like flies to a fresh and steaming turd.

Now don’t get me wrong I’m not saying this makes Deutsche Bank special among big banks except in the category of being caught. There, they have certainly wrestled the crown from Citi and Wachovia.

What I am saying is that that much laundering in that many localities is going to mean the usual bankers defence of ‘one bad apple’, ‘one corrupt employee’, ‘one weakness in our otherwise impeccable rules which are now being updated etc etc’ is not going to wash (sorry I couldn’t resist) so easily.  Deutsche Bank is a dirty bank. But does this mean Deutsche Bank could be brought up on corporate criminal charges? Not a chance. To do that could mean it would lose its banking license and that would be “Deutsche-it”. And “Deutsche-it” would be far more dangerous to the EU as a whole than Brexit. Deutsche Bank is a filthy, systemically dirty bank but a bank which the German state is going to save. Using tax payers money. But how?

Of course every nation has such a bank, we certainly do here in the UK. But it is full of irony that the self-proclaimed capital of fiscal prudence is going to be intervening to save its flag-carrying bank and not just save it but do so in a way that makes a mockery of all the fine words about lessening systemic risk and tackling the problem of Too Big To Fail Banks.  Surely we all now have to admit that all that fine talk was just so much political smoke blown up our collective rear ends?

By merging Deutsche Bank with Commerzbank, which is itself one of the global Banking-Dead, being still part owned by the German tax payer – much like our own moaning, shuffling, dribbling RBS, the German ‘regulator’ will be creating an even larger corpse.  Of course old habits are hard to kick and the German answer to every failing bank it has ever had, has been to merge it with another. They did it way back in the 90’s when they  created HVB from two failing Bavarian banks and again with Hypo and Depfa  just before the crash. It never works for them but they keep on trying. To be fair, so does every other financial regulator in every other country

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