| <No.652> |
| European Banks Shed 20,000 Jobs as Worries Grow Over Deutsche Bank |
The U.S. Department of Justice accuses Deutsche Bank
of misselling mortgage securities,
residential loans
repackaged as bonds
and sold to investors,
dating back to 2005.
Regulators have put the initial fine at $14 billion;
Deutsche Bank says
that is just an "opening position."
Analysts agree.
"I think it’s very likely
the fine will be negotiated down.
The big question is by how much,
just how big it will end up being.
Deutsche Bank has suggested that
it envisages a fine between 3 and 5 billion,
which would be just about affordable
for Deutsche Bank.
But in fact it seems to be quite a lot higher."
If it is much higher,
analysts say
Deutsche Bank would have to raise funds
by tapping shareholders for cash.
If that failed,
under new European rules
major share and bond holders would have to come up
with what’s known as a "bail-in."
The last resort would be a state rescue.
"I think that
a state bailout is possible.
The German government is in a very good position
to bail out the bank
in terms of its public finances.
Its debt is relatively low,
has no deficit.
But the difficulty will be a political one.
Germany after all has resisted similar bailouts
in Italy very recently
and in Greece before that."
The German government and Deutsche Bank insist
there has been no discussion of a state bailout.
Some government officials blame
the European Central Bank’s policy of ultra-low rates
which has hurt bank profitability.
Poor profits have hit other banks
with Germany’s Commerzbank cutting one in five of its workforce,
and Dutch giant ING shedding several thousand employees.
Several Italian banks are also on the brink
of needing state help.
So is Europe headed for a repeat of 2008
and another banking crisis?
Austria’s Finance Minister says
safeguards are in place.
"After the financial crisis,
we’ve not quite worked through the banking issues
but what I am very convinced of is that we do not have a banking crisis,
we have a profitability crisis in our banks."
Recent stress tests suggested
the vast majority of European banks are strong enough to survive.
But with little sign
that interest rates will rise soon,
the challenge to banks’ balance sheets seems likely to continue.
Henry Ridgwell for VOA News, London |
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