"Shabby" banks

Biggest German bank Deutsche Bank is supposed to pay 4 billion dollars to the USA for settling the accusation about selling mortgage securities which feed the scepticism on markets. Stocks of the bank dropped over the 8 % yesterday.

Except that the Deutsche Bank is going to appeal from a judgment and push to lower the fine. After all, before the last crisis, it wasn’t only the Deutsche Bank but many other reputable bank houses, who were sinning by selling packages of shabby mortgages. And many of those managed to get softer punishment.

In any case, the fine from the USA is another skeleton which the biggest German bank has already many of in its closet. Firstly, there are bad deals from the past laying heavy on its shoulders. Moreover, we found out recently that the bank was keeping the loss of 12 billion USD secret during the finance crisis. On top of that, there were manipulations with the LIBOR interest rate. The accusation that the bank was also laundering money of Russian oligarchs who are on the sanction list of the USA didn’t help to improve the bank’s reputation either.

That’s why it is trying to save where it can. But not even the firing of employees and cancelling the braches could be a long-term solution. The investors have already given up on the bank long time ago. The price of its stocks dropped 84 % in last 10 years.

The possible downfall of the biggest German bank could be a detonator for another crisis. When one fish dies usually the entire shoal suffers and it’s similar in the bank world since it is all connected. That is also a reason, why will the German government try to keep the Deutsche Bank on its feet no matter what.