Deutsche Bank is only the tip of an iceberg

Maybe you have already noticed that the information around the biggest German bank, which was discussed at the end of last week but the professional circles were talking about it for a couple of months now was just a storm in a glass of water. Many things would suggest that. The European stock indexes were still mostly dropping on Thursday but we can’t compare it to the panic from last week. Moreover, there’s not as many news about Deutsche Bank on the news servers anymore. Like the topic got old.

Just like my colleague Pikora won’t get bored of post-pubertal jokes about sex, even though his peers have already grown from them at least twenty years ago, just like that can the public always lusting for new media drama, get bored of the Deutsche Bank but the community of investors surely won’t drop it.

I can assure you that the latest news is very substantial. If we had to tersely sum it up: The situation of Deutsche Bank continues to be pitiful and the German government knows it. It doesn’t suit them at all since everything is happening just before the elections that should be held in 2017. So they decided to go for the tactic most logical from their point of view: Hush it up as much as they can.

Does it sound far-fetched? You decide: The German financial supervisory authority over banks (so-called Bafin), which was checking the information that Deutsche Bank was knowingly allowing by conniving with Russian oligarchs who were under the international sanctions laundering their money, is supposedly not finding any signs that something like that has happened. So it won’t demand a fine. Yes, that would sound nice except the problem is that Deutsche Bank is being investigated for the same thing in the USA and in Britain as well. Neither American nor Britain authorities seem like they want to let the suspicion go. We can’t avoid the questions if the German supervisory authority doesn’t protect Deutsche Bank only for political reasons.

The suspicion is even stronger in the light of another discovery. It is known that the finance market likes gossip more than old lady landlord living above you. So nothing can’t be hushed up. So the information leaked from the circles around the German government saying that the German government is supposedly secretly negotiating with the American department of justice (DOJ) about postponing or lowering the fine in the sum of 14 billion dollars for the deceptive businesses with toxic packages of mortgage-backed securities. (Are you wondering why I was talking about the Russian oligarchs and not mortgages before? Yes, I am not saying it’s the same case. In reality, the bank is tangled in several parallel problems.) So far the German government has been very obviously showing the public that it is not intending to save Deutsche Bank. Well, it is obviously not planning to save it financially right before the elections. Nobody said that it won’t speak on its behalf in the diplomatic route.

Statements of several professional German organizations (like the German chamber of industry for example and others) don’t seem trustworthy when they are publically claiming that they “know nothing about the crisis in Deutsche Bank”. With all due respect – what can chamber of commerce and industry know about the market value of derivative contracts well hidden in the Deutsche Bank’s balance? The announcement seems more like a way to calm down the public at all costs. The official German authorities simply can’t allow – especially right before the elections – to have a panic sprouting about the bank which employs 100 thousand people.

Maybe it could seem like at the moment when the German government started helping Deutsche Bank full force (even though it acts like it’s not included at aaaaaaaaaall on the outside), it would be useless to talk about Deutsche Bank since it got a powerful saviour. I don’t see it that way. Last week I asked a rhetorical and little bit over the top question, when will the case “explode”. It exploded on Thursday in its own way. So far there was at least on the outside a hypothetic chance for the public to think that the entire affair is only blown up media bubble and the bank doesn’t have such serious problems. When the frenetic effort of the German administration started coming up to the surface the entire thing seems different in the light of these actions: The seriousness of the cause is underrated by media.

It is obvious that it’s not only about Deutsche Bank – that’s only the tip of an iceberg. This case is in reality just a display of an entire European banking industry. Let’s not forget that Deutsche Bank ended up between ten weakest banks in last stress tests. In other words – there are at least nine other banks that are in same miserable condition. And then many and many others, which are doing badly as well but not as badly as Deutsche Bank. The persistent effort of the German government to sweep any suspicion of bank’s problems under the rug is symbolic for the Eurozone’s approach to the entire banking sector. We are getting into the core of things. European banks as a whole are probably not healthier than they were before the crisis broke out in 2008 – on the contrary. It’s only not visible on the first sight. And everybody who had the silly idea to invest in European banking stocks should remember that. Or those, who had equally silly idea to save their savings into one of the funds which are not subject to banking insurance of investments.