Back in 2008, when the business cycle was sharply turning, leading to a dramatic shortage of business for the major US investment banks which in the preceding years had gone on a hiring spree, one solution was to “shutter” one or more key competitors. This, according to some, was the underlying motive behind the elimination of the “outsider” banks, first Bear Stearns and then fixed income giant Lehman Brothers. Of course, their failure unleashed a series of unprecedented events (or as some have also dubbed them, “fringe taxpayer funded benefits”) for the banking sector, which involved a highly unpopular multi-trillion bailout, and as a result the elimination of competitors – even with the government’s blessing – is now generally frowned upon. However, merely crippling them, that’s another story.
Being crippled is what may soon happen to Deutsche Bank, whose next chapter in its melodramatic saga will involve the bank exiting some if not most of its US operations. According to a report in German newspaper Welt am Sonntag, “Deutsche Bank may be forced to shrink its U. S. activities as part of the settlement deal with the DOJ.”
Die Welt, sourcing unidentified people in the banking industry, said that radical changes to the business model are typical requirements in settlement arrangements with the U. S. government. Deutsche Bank ‘must clarify one or two things’ before an agreement can be struck, the person said, cited by Bloomberg. Germany’s largest bank will probably give up part of its U. S. investment banking business, the newspaper cited unidentified people in the banking industry as saying. As Reuters adds, while abandoning the United States, its most important market, altogether was very likely out of the question for the bank, it could consider scaling down its activities, so as to focus more on the needs of German corporate clients overseas.
This post was published at Zero Hedge on Oct 15, 2016.
Follow on Twitter
Recent Comments