Deutsche Bank Merger Talk Ends — Now Comes the Pain

Deutsche Bank is not some little German bank running amok. It’s designated a G-SIB or Global Systemically Important Bank. That means that it has the potential to spread systemic risk in the global financial system.

By Pam Martens and Russ Martens and cross-posted from Wall Street on Parade

Anyone who thought that Commerzbank was going to agree to a merger with Deutsche Bank while the latter was under multiple investigations in the U.S. for money laundering and questionable loans to the President of the United States, a man who was himself under a criminal probe until last month, was likely off their meds.

Why Commerzbank allowed the speculation of a merger to proceed this long is the real question. At any event, both banks confirmed this morning that merger talks have ended with a spokesperson for Commerzbank saying this:

“After careful analysis it became apparent that such a combination would not be in the interests of either bank’s shareholders or other stakeholders.”

The breakdown of merger talks comes on the heels of a report on CNN last evening that Deutsche Bank has “begun the process of providing financial records to New York State’s Attorney General in response to a subpoena for documents related to loans made to President Donald Trump and his business.”

Deutsche Bank is also the subject of a probe by the House Financial Services Committee and House Intelligence Committee. Congressman Adam Schiff, Chair of the House Intelligence Committee, told Politico last week that “As part of our oversight authority and authorized investigation into allegations of potential foreign influence on the U.S. political process, the House Intelligence Committee today issued subpoenas to multiple financial institutions in coordination with the House Financial Services Committee, including a friendly subpoena to Deutsche Bank, which has been cooperative with the Committees.” According to news reports, the other banks receiving subpoenas or document requests include JPMorgan Chase, Citigroup, Morgan Stanley, Bank of America, Wells Fargo, Capital One, Royal Bank of Canada and Toronto Dominion Bank.

The potential for more fines and reputational damage to Deutsche Bank is extensive. Last month Bloomberg sized up the bank’s risk management skills as follows:

“Lax money-laundering controls, market rigging, selling toxic securities—Germany’s Deutsche Bank has been investigated for all of these practices since the 2008 financial crisis, running up $18.3 billion in fines and legal costs, more than any other European bank. Regulators and prosecutors have raided the bank’s Frankfurt headquarters, subpoenaed documents and grilled executives in dozens of probes on three continents.”

Deutsche Bank is not some little German bank running amok. It’s designated a G-SIB or Global Systemically Important Bank. That means that it has the potential to spread systemic risk in the global financial system

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