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Credit Suisse and Deutsche Bank are particularly active in high-risk US financial businesses. That parallel is already enough to bring Deutsche Bank down on stock markets after the CS earthquake: Shares of Germany’s largest financial institution temporarily fell by about 15 percent on Friday.
The reason for the price drop was Deutsche Bank’s announcement on Friday morning: it announced that it would repay US$1.5 billion worth of Tier 2 bonds before maturity. Usually good news because it indicates that a bank has sufficient liquidity. However, in the heated atmosphere recently, investors interpreted the announcement in the opposite direction. “This shows that confidence in globally active banks has been undermined,” says Sergio Rossi, 55, Professor of Macroeconomics and Monetary Policy at the University of Freiburg.
Even German Chancellor Olaf Scholz (64, SPD) had to send sedatives considering Friday’s price turmoil: “There’s no need to worry about anything,” Scholz said. Despite the parallels, there are also differences between CS and Deutsche Bank.
Payment
Credit Suisse announced a loss of CHF 7.6 billion last year. Deutsche Bank posted a net profit of €5.6 billion – its best result in 15 years. And this is despite the Ukraine war, inflation, energy crisis and recession fears.
Titles
The Greensill debacle, the Archegos bankruptcy, the quarantine violations, the change of boss… Credit Suisse has made one negative headline after another for years. There can be no such question at Deutsche Bank.
cash outflows
CS customers have recently withdrawn up to 10 billion francs from their accounts every day. “We’ve never seen such a flight of deposits at Deutsche Bank,” says economics professor Rossi. “Unlike Credit Suisse, customers don’t seem to expect bankruptcy.”
reconstruction
CS CEO Ulrich Körner (60) and Chairman Axel Lehmann (64) announced a massive restructuring of the troubled bank last fall: massive layoffs, cuts to investment banking, a focus on profitable Swiss business. The transformation came too late. “There is already such a restructuring behind Deutsche Bank,” Rossi says. “Withdrew from highly speculative financial market activities in the United States and laid off many staff members.” The latter is not well received by the public – but it does exist in the markets.
Surveillance
The Financial Market Authority (Finma) and the Federal Council have faced criticism since the urgent takeover of CS. “Rightly enough,” Rossi says. The auditors should have requested action from Credit Suisse at the latest when the rate hike was made last summer. “For example, it’s slowly throwing out risky business areas.” Compliance expert Monika Roth (71) announced a few days ago that authorities should force long-time CS President Urs Rohner (63) to resign.
In Germany, the European Central Bank (ECB) and the Federal Financial Supervisory Authority (BaFin) are responsible for control. “You looked better,” Rossi concludes.
Source :Blick
I’m Tim David and I work as an author for 24 Instant News, covering the Market section. With a Bachelor’s Degree in Journalism, my mission is to provide accurate, timely and insightful news coverage that helps our readers stay informed about the latest trends in the market. My writing style is focused on making complex economic topics easy to understand for everyone.
