Daily Management Review

After CEO Reassures on Stability, Share of Deutsche Recover


After CEO Reassures on Stability, Share of Deutsche Recover
After fears over its stability sent tremors through global financial markets, assurances that Germany's largest lender remains robust was given by Deutsche Bank's chief executive sought to reassure his staff on Friday.
After being handed a demand for up to $14 billion earlier in September from the U.S. authorities for misselling mortgage-backed securities, Deutsche, which employs around 100,000 people, has been engulfed by crisis.
The bank would have to turn to investors for more money if it is imposed in full even as it is fighting the fine. A newspaper report that it was working on a rescue plan for the bank was denied by the German government this week.
Hitting out at "certain forces" that wanted to weaken trust in the bank, Chief Executive John Cryan's letter addressed reports of the departure of a few hedge fund clients.
Before bouncing back to 10.96 euros by late afternoon, Deutsche shares were volatile again, initially falling around 8 percent in Frankfurt to a record low below 10 euros. The bank's market capitalization has fallen to 15 billion euros ($16.8 billion) and the shares have lost more than half their value this year.
Trading volume in Deutsche's debt has soared 15-fold in a month as investors rush to offload the troubled German lender's bonds and has more than doubled this week.
While sources were quoted in the media saying that one large hedge fund in Asia had pulled out collateral from Deutsche amounting to $50 million in the last two days.
On Friday, Cryan sought to put the moves into perspective.
"We should look at the complete picture," Cryan said in the letter to the bank's workers.  He added that Deutsche had reserves of more than 215 billion euros and more than 20 million customers.
"We are and remain a strong Deutsche Bank."
While Deutsche is much smaller than Wall Street rivals such as JPMorgan  and Citigroup, it has significant trading relationships with all of the world's largest finance houses. The bank was identified as bigger potential risk to the wider financial system than any other global bank by the International Monetary Fund this year.
Painful memories of the 2007-2009 financial crisis have been stirred by talk of a government rescue and worries over a major bank in Europe's largest economy.
Using improved controls on liquidity plans showing how they would respond to a major market shock have to be mow made by banks. In the event of impending failure plans on how lenders could be smoothly closed down are also made by regulators.
Swift action on Deutsche w3as called for by Italy whose banks have their own troubles caused by soured loans.
"Just like the problem of bad bank loans must be solved within a reasonable time frame, so it should be for Deutsche Bank's problems," Economy Minister Pier Carlo Padoan told Italian daily La Stampa.
Germans dislike Deutsche because of its pursuit of investment banking abroad that resulted in billions of euros of penalties for wrongdoing and with Germany facing elections next year, there is little political appetite for helping the group.