Deutsche Bank’s deficiency could rattle the European banking system, warns analyst

Market - Mohit Shah - Dec 21,2016

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deutsche banks deficiency could rattle the european banking system warns analyst

As per a senior financial analyst, if Deutsche Bank is allowed to blunder then the effects might collapse the whole European banking system.

The failure of Deutsche Bank is expected to outset serious problems for the entire banking system in Europe.

At present, the German lender is facing a penalty of $14 billion from the U.S. Department of Justice (DOJ) due to the mis-selling of residential mortgage-backed securities (RMBS) in the inaugural stages to the financial crisis of 2008.

Since the start of this year, the bank’s shares are down by 21%; meanwhile, a settlement between DOJ and Deutsche Bank is not showing any significant pace.

The uncertainty of the deal has kept the investors and analysts in a frozen state since several months. However, there are active speculations that Deutsche Bank might land on an agreement with the DOJ and the announcement could be made on Wednesday.

Deutsche Bank had been said to a settlement of $4 to 5billion, as per specialist German financial publication Der Platow Brief. It also said that the bank was also looking to chip off bonuses and raise new capital. Meanwhile, the markets wait for a decision to be reached as shares of Deutsche Bank have been tumbling back & forth as the settlement speculations are growing strong.

At the moment, the European banks are struggling to produce profits due to weak earnings, enormous fines and a low-interest rate environment. On the other hand, the governments and central banks all across the globe are ready to pump in extra capital if needed; however, the banking system is quite unstable in the current circumstances.

"If Deutsche Bank doesn't make it, forget European banks as a whole," were the concerned words of Ewen Cameron Watt from BlackRock.