Saying Germany's biggest lender needed to reform its business model and rapidly reach a deal with U.S. regulators over a potentially huge fine, IMF chief Christine Lagarde gave Deutsche Bank some tough advice on Thursday.
While sources said Germany's financial watchdog had found no evidence so far that Deutsche violated money laundering rules in Russia, possibly relieving one of its many headaches, a senior European official tried to shore up confidence in the continent's banking system, saying it was working well overall.
Meanwhile, newspaper Handelsblatt reported that the chief executives of several German blue-chip companies are ready to offer a capital injection if needed to shore up the bank and have discussed Deutsche's problems.
In an era of ultra-low interest rates, the problems of Deutsch has been identified as a bigger potential risk to the financial system than any other global bank by the International Monetary Fund and Lagarde did not mince her words about the problems of Deutsch.
"Deutsche Bank, like many other banks, has to look at its business model. It has to look at its long-term profitability - given the lower-bound interest rates we have around the world and probably for longer than many expect - and decide what size it wants to have and how it wants to strengthen its whole balance sheet," she said during the IMF and World Bank's autumn meetings in Washington.
In its latest setback that sent its shares to a record low last week and worried clients, a penalty of up to $14 billion that the U.S. Department of Justice (DOJ) plans to impose for misselling mortgage securities is being fought by Germany's flagship bank. This has put the bank under heavy pressure.
Measures like revamping information technology, selling non-core assets and slashing a workforce of around 100,000, are part of the steps being taken by the bank now for a deep overhaul. On Thursday, total job losses for the ban in German was brought up to 4,000 after it struck another deal with its works council to cut a further 1,000 staff.
Lagarde underlined the importance of reaching an out-of-court settlement with the DOJ while acknowledging that Deutsche was selling assets.
"A bad settlement is always better than a good trial," she said, adding that Deutsche was "not in a trial mode. A settlement would ... deliver some certainty as to what weight the bank will have to carry and whether it matches with its provisions or not. So the sooner, the better," she said.
Deutsche says it has put aside 5.5 billion euros for its expected legal bill and has already spent 12 billion euros ($13.4 billion) on litigation since 2012. While Deutsche hopes to negotiate their penalties down to much smaller sums like what some other banks have done, the potential penalty thought about by the DOJ are much higher than the 5.5 billion euros put off by the bank.
Deutsche has begun speaking with Wall Street firms about its options to raise capital in preparation for a higher-than-expected legal bill. According to a Bloomberg report, senior advisers at the firms are offering to help underwrite a stock sale to raise about 5 billion euros.
(Source:www.reuters.com)
While sources said Germany's financial watchdog had found no evidence so far that Deutsche violated money laundering rules in Russia, possibly relieving one of its many headaches, a senior European official tried to shore up confidence in the continent's banking system, saying it was working well overall.
Meanwhile, newspaper Handelsblatt reported that the chief executives of several German blue-chip companies are ready to offer a capital injection if needed to shore up the bank and have discussed Deutsche's problems.
In an era of ultra-low interest rates, the problems of Deutsch has been identified as a bigger potential risk to the financial system than any other global bank by the International Monetary Fund and Lagarde did not mince her words about the problems of Deutsch.
"Deutsche Bank, like many other banks, has to look at its business model. It has to look at its long-term profitability - given the lower-bound interest rates we have around the world and probably for longer than many expect - and decide what size it wants to have and how it wants to strengthen its whole balance sheet," she said during the IMF and World Bank's autumn meetings in Washington.
In its latest setback that sent its shares to a record low last week and worried clients, a penalty of up to $14 billion that the U.S. Department of Justice (DOJ) plans to impose for misselling mortgage securities is being fought by Germany's flagship bank. This has put the bank under heavy pressure.
Measures like revamping information technology, selling non-core assets and slashing a workforce of around 100,000, are part of the steps being taken by the bank now for a deep overhaul. On Thursday, total job losses for the ban in German was brought up to 4,000 after it struck another deal with its works council to cut a further 1,000 staff.
Lagarde underlined the importance of reaching an out-of-court settlement with the DOJ while acknowledging that Deutsche was selling assets.
"A bad settlement is always better than a good trial," she said, adding that Deutsche was "not in a trial mode. A settlement would ... deliver some certainty as to what weight the bank will have to carry and whether it matches with its provisions or not. So the sooner, the better," she said.
Deutsche says it has put aside 5.5 billion euros for its expected legal bill and has already spent 12 billion euros ($13.4 billion) on litigation since 2012. While Deutsche hopes to negotiate their penalties down to much smaller sums like what some other banks have done, the potential penalty thought about by the DOJ are much higher than the 5.5 billion euros put off by the bank.
Deutsche has begun speaking with Wall Street firms about its options to raise capital in preparation for a higher-than-expected legal bill. According to a Bloomberg report, senior advisers at the firms are offering to help underwrite a stock sale to raise about 5 billion euros.
(Source:www.reuters.com)
