ECB fears for withdrawal of €1.1TRILLION Deutsche Bank – and impact on the global economy

Tuesday, April 17, 2018
By Paul Martin

THE EUROPEAN Central Bank has moved first to protect global financial markets from the potential chaos caused by Deutsche Bank winding down the trading of $1.1 trillion assets on its balance sheet.

Tue, Apr 17, 2018

The ECB has made Deutsche the first bank under its supervision to report on the cost and consequences of its investment bank’s exit from the global markets.

The ECB’s concern stems from the collapse of Lehman Brothers in 2008, and regulators are known to scrutinise large, struggling institutions like Deutsche Bank over their potential to destabilise global markets.

Lehman’s sudden and shocking fall intensified the 2008 crisis and wiped $10 trillion from global markets. Although a Deutsche Bank source confirmed to the Financial Times that other Eurozone banks would also be tested, the ECB’s scrutiny comes amid speculation as to the future of Deutsche’s UK-based investment bank.

After failing to recover from the crisis caused, in part, by Lehman Brothers’ demise, the beleaguered financial institution has paid out an approximate £12billion ($17bn) in fines and damages for misconduct since the start of 2008, according to company filings compiled by Bloomberg.

Deutsche is already in the middle of a global review of the investment bank, known internally as Project Colombo, to determine the way forward as revenues shrink and clients look for profit elsewhere.

Scrutiny has fallen on the bank’s determination to join the big boys in global investment, and its subsequent troubles. A leading finance consultant has described Deutsche’s move into the big bad world of investment banking as “emotional” and “ugly.”

Octavio Marenzi, CEO of consultancy Opimas said that the struggle of their investment arms is, “an emotional issue for them.”

He said: “They’ve had to come around and painfully admit their investment banking baby is quite ugly.”

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