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Categorized | Banks

US waging ‘economic war’ over Deutsche

Posted on October 2, 2016

©FT montage

Deutsche Bank’s shares fell on news that the US Department of Justice was seeking a multi-billion dollar settlement

    German politicians have accused the US of waging economic war against Germany as concern continues to rise among the country’s political and corporate elite over the future of Deutsche Bank, its biggest lender.

    Some of Germany’s top industrial chiefs have also rallied to the bank’s side following the market storm that last week threatened to engulf Deutsche, stressing its importance to the German economy and expressing confidence in the leadership of John Cryan, the bank’s chief executive. 

    Deutsche has been under intense pressure since the US Department of Justice requested it pay $14bn to settle claims of mis-selling mortgage securities last month, sparking fears about the bank’s capital levels. Shares in the bank fell below €10 to their lowest level since 1983 before bouncing back on Friday after some media reports suggested Deutsche was close to a much smaller $5.4bn deal with the US authorities.

    Peter Ramsauer, chairman of the German parliament’s economics committee, told the German newspaper Welt am Sonntag that the DoJ’s move against Deutsche “has the characteristics of an economic war”. 

    He said the US had a “long tradition” of using every available opportunity to wage what amounted to trade war “if it benefits their own economy”, and the “extortionate damages claims” being made in the case of Deutsche Bank were an example of that.

    His remarks were echoed by Markus Ferber, a member of the European Parliament from the CSU, the Bavarian sister party of Angela Merkel’s Christian Democrats. He told Welt that the timing and size of the DoJ’s initial request of Deutsche suggested it was a “tit for tat response” by the US authorities to the EU’s recent move against Apple. Last month, the EU ordered Ireland to claw back €13bn in taxes from the US technology company, saying it gave the company illegal state aid. 

    Meanwhile, some of the biggest names in German industry have expressed their support for Deutsche. “Strong German banks are important for a strong German economy,” Dieter Zetsche, boss of carmaker Daimler, told the Frankfurter Allgemeine newspaper. “This is a close connection, and it will remain so.”

    Johannes Teyssen, head of utility Eon, told the same paper that Germany as a big exporter would suffer “if we can only secure access to international capital markets through banks in other countries”.

    The Big Read

    Deutsche Bank: Settling for less

    FRANKFURT AM MAIN, GERMANY - SEPTEMBER 26: The headquarters of Deutsche Bank stand on September 26, 2016 in Frankfurt, Germany. Shares of Deutsche Bank dropped by over 6% today and fell to their lowest level since the 1980s following reports that the German government will not step in to shore up the bank. U.S. regulatory authorities are seeking a USD 14 billion fine from Deutsche Bank due to its role in contributing to the U.S. sub-prime mortgage crisis of 2007-2008. (Photo by Hannelore Foerster/Getty Images)

    A US demand for $14bn has rattled Germany’s biggest bank, raising the spectre of a Berlin bailout

    Peter Terium, head of the other big German power company, RWE, said it was “important for us to have a global player like Deutsche Bank at our side” in the international marketplace, while Joe Kaeser, boss of Siemens, said Deutsche’s management “has our complete confidence”.

    Deutsche was dealt a fresh blow at the weekend when a court in Milan ordered the lender, as well as two other banks — Banca Monte dei Paschi di Siena and Nomura — to stand trial for alleged financial crimes. 

    Deutsche has emphasised that its €215bn of cash and liquid assets are sufficient to cope with any short-term stress. But analysts say the bank is short of capital, lagging behind its main rivals and its own target.

    Hedge funds have bet heavily against Deutsche by short selling its shares. Some have also started withdrawing collateral held by the bank for derivative trades, prompting fears of a rush for the exits by clients.

    Investors are worried that if the bank does not manage to agree a settlement with the DoJ over the weekend, its shares could be hit when they resume trading on Monday in New York and on Tuesday in Frankfurt. One hedge fund manager said it risked being “a black Monday for Deutsche”.

    Additional reporting by Martin Armold in London and Rachel Sanderson in Milan