“We’re Not Dangerous”: Deutsche Bank’s Chief Risk Officer

Monday, August 1, 2016
By Paul Martin

by Wolf Richter
August 1, 2016

No crisis at Deutsche Bank, really, I swear.

When Stuart Lewis, Chief Risk Officer at Deutsche bank, was asked in an interview, published in the Frankfurter Allgemeine on Sunday, if his institution is “the most dangerous bank in the world” – a reference to the IMF’s call that among globally systemically important banks, “Deutsche Bank appears to be the most important net contributor to systemic risks” – he replied:

“No, not at all. Only one IMF report has recently muddled up the situation: We are not dangerous. We are very relevant. Deutsche Bank is interwoven with the entire financial sector. We are one of the largest universal banks in the world. But to make it clear: Our house is stable. The balance sheet is healthy.”

Could he say that “in good conscience?”

“Absolutely. Look at how we have capitalized the bank since the Financial Crisis. We have taken €115 billion in risks off the balance sheet and have €220 billion of liquidity. Concern for us is unfounded.”

Alas, the European Banking Authority released the stress test results on Friday. Deutsche Bank didn’t fail in part because there was no way to fail. No bank could fail, not even Italy’s Banca Monte dei Paschi di Siena which is in full collapse-and-bailout mode at this moment. Mercifully, no bank could fail the test by design. But the Tier 1 capital ratio after in the “adverse scenario” made it possible to rank the banks. At Deutsche Bank, that ratio dropped to 7.8%, making it the 10th riskiest bank among all European banks in the stress test.

Commerzbank, the second largest German bank, which was already bailed out by the government during the Financial Crisis, and which is still partially owned by the government due to this bailout, was the 8th riskiest bank, ahead of Societe Generale in 9th place and behind Barclays in 7th place. Then came Irish, Italian, and Spanish banks. In third place was the Austrian cooperative banking group Raiffeisen-Landesbanken. In second place, Allied Irish Banks. And of course, the winner, Monte dei Paschi.

The Rest…HERE

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