re: Deutsche Bank Litigation / Bailout Watch

Visual Capitalist had a pretty good run-down of what's causing DB's woes, which they published back on July 8: " The Epic Collapse of Deutsche Bank."

quote:

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THE BEGINNING OF THE END

If the deaths of Lehman Brothers and Bear Stearns were quick and painless, the coming demise of Deutsche Bank has been long, drawn out, and painful.

In recent times, Deutsche Bank’s investment banking division has been among the largest in the world, comparable in size to Goldman Sachs, JP Morgan, Bank of America, and Citigroup. However, unlike those other names, Deutsche Bank has been walking wounded since the Financial Crisis, and the German bank has never been able to fully recover.

It’s ironic, because in 2009, the company’s CEO Josef Ackermann boldly proclaimed that Deutsche Bank had plenty of capital, and that it was weathering the crisis better than its competitors.

It turned out, however, that the bank was actually hiding $12 billion in losses to avoid a government bailout. Meanwhile, much of the money the bank did make during this turbulent time in the markets stemmed from the manipulation of Libor rates. Those “wins” were short-lived, since the eventual fine to end the Libor probe would be a record-setting $2.5 billion.

The bank finally had to admit that it actually needed more capital.

...

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I'll be honest, it's still hard for me to figure out what's going on here. I know that the headlines tend to focus on the litigation surrounding LIBOR rate fixing penalties, as well as penalties for evading U.S. sanctions on certain countries--but on a more fundamental level, the bank appears to have gotten over-leveraged, and then suffered under very poor risk management for its derivatives books. Regarding what positions the bank was taking on derivatives that were causing additional losses... that's the part I still don't know.

Maybe it's not related to derivatives at all. Maybe it really is just a function of massive litigation losses, scandals, and the general malaise of the European banking sector. Other EU-area banks aren't doing that well either, simply because there is absolutely nothing going and no loans to make in most European economies.