Deutsche Bank - They think its all over.....
Discussion
Surely the solution is for the govt to nationalise the bad bank & Target2 liabilities freeing up the remaining “good bank”.
Maybe then the German population will realise they are on the hook for £1trillion which will never be repaid and should by any normal measure Rd be written off.
Maybe then the German population will realise they are on the hook for £1trillion which will never be repaid and should by any normal measure Rd be written off.
Welshbeef said:
Surely the solution is for the govt to nationalise the bad bank & Target2 liabilities freeing up the remaining “good bank”.
Maybe then the German population will realise they are on the hook for £1trillion which will never be repaid and should by any normal measure Rd be written off.
Target2 liabilities aren't sitting in any normal bank... They're between intraEZ central banks. Maybe then the German population will realise they are on the hook for £1trillion which will never be repaid and should by any normal measure Rd be written off.
Digga said:
It's a strange dissonance with many private and business customer's experience with using retail banks.
In general, for the most part, the service is so poor any decently organised outfit could run a coach and horses through the competition, but they all seem hell bent on chasing each other down the low-quality offshore interface route.
I can see that costs mean consumers would have to 'pay' for better levels of service, but what is going on right now looks distinctly like a lemming race to the bottom.
Agreed, but the problem is twofold. Firstly, do consumers want to pay – or just want the lowest “headline” rates (all the while firms are being pressured on share price). Unless management are truly creative (or bold) it’s all too easy to get caught in a death spiral (which leads too…). In general, for the most part, the service is so poor any decently organised outfit could run a coach and horses through the competition, but they all seem hell bent on chasing each other down the low-quality offshore interface route.
I can see that costs mean consumers would have to 'pay' for better levels of service, but what is going on right now looks distinctly like a lemming race to the bottom.
Secondly, the way these banks – in particular Prime Brokers / Custodian etc pitch service is aggressive on price – and the clients KNOW the banks will price each other to death. There is one SWF, that has a fee split 99 Vs 1% in its favour. There is no possible way for a bank to support that split other than as a loss. If ADIA, KIA, SAMA, Norges, CIC etc all get similar deals - and those represent near $4trillion in Assets. The little man isn’t going to get a look in (or rather premium priced to pay for the big fish). The main G-SIB banks (so top 17 bank names) are all focussed towards scale, automation and marginal profits. If you don’t fit this profile; you are going to get spanked on price or service.
I’d say we are at or approaching an inflection point on how these services are sold by banks. Secondary activities such as yield enhancement (or more accurately tax arbitrage), are getting hammered out the market (by regulations AND reputational risk). These structures historically high profit (subsidising other services) were like crack – in particular to the European banks. Deutsche, Commerz, BNP, Unicredit etc – all run (and have been reliant upon) these types of structures that produce profits by reducing tax liabilities for offshore investors (Double Tax Treaty rips). Not only have these banks prostituted themselves to their clients with these trades (look up the news on German Cum Cum and Cum Ex trades) – BUT also their US peers. European banks not only facilitate these trades for US banks (and their clients – shielding them from the tax risks) – BUT are also massive providers of funding and liquidity (so all the QE that the ECB does often ends up in Goldman’s balance sheet NOT the Eurozone). They are all signing their own death warrants – BUT the EC is becoming complicit in this destruction by offering to remove capital buffers (so zero reserve banking) AND re-establishing the link between Investment and Retail banking. Looking through the technical adjustment to Basle regs, it’s a political acknowledgment that their entire banking sector is sick, or rather 100% exposed to a sovereign debt crisis that brings the house down on top of themselves…
Digga said:
What makes the Deutsche problem so much more worrying is that the collateral requirements for EU banks are view with such scepticism. One wonders who will crumble next and what the repercussions might be…
I’d probably suggest that Deutsche Bank deleveraging AND shutting down Prime Activities; will reduce their collateral position and possible better insulate them against future losses. Doing this now MIGHT actually make sense - in trading we always say the first cut is always hardest. A short end 8bn hit is harsh, but it might save 20bn odd in the long term. The bad bank structuring is going to be interesting how they deal with it. If it’s (probably) loaded up with corporate or convertible debt; it’s going to struggle on MtM valuations. I’d suspect there will be some pretty interesting structured deals / shadow banking activities upcoming. Getting technically illiquid collateral out of regulatory oversight is off massive benefit – and as everyone and their dog is awash with cash these days – it’s probably we will see non-banks stepping into complex financing structures (shadow banking). And we all know how that might end up…
There is a clear argument that attempts to make the world safer post crisis; have actually further destabilised the system (or stored up lager future risks…..)
Henners said:
Burwood said:
It's over for DB. Anyone any good will leave. Are they now a Retail bank
Yup.I know 4 people who were at DB, all very very good. They fled about 2 years ago.
Burwood said:
Henners said:
Burwood said:
It's over for DB. Anyone any good will leave. Are they now a Retail bank
Yup.I know 4 people who were at DB, all very very good. They fled about 2 years ago.
Stongle, thanks. Excellent post which TBF I follwed the gist of, but not 100% of the deals you refer to.
I think the key matter, as you say, is that one way or another, we're reaching an inflection point for the way banking is run.
As for reducing risk, I have long felt that most of the efforts - BoE, ECB and FEd - have done little (if anything) to actually cut potential crises but have inadvertently done a lot to make banks less financially stable and also less able to serve consumers and businesses. You only have to look at the pro-cyclical off-loading of loans in the GFC as one example.
I think the key matter, as you say, is that one way or another, we're reaching an inflection point for the way banking is run.
As for reducing risk, I have long felt that most of the efforts - BoE, ECB and FEd - have done little (if anything) to actually cut potential crises but have inadvertently done a lot to make banks less financially stable and also less able to serve consumers and businesses. You only have to look at the pro-cyclical off-loading of loans in the GFC as one example.
Camoradi said:
I heard a "financial expert" on Radio 5 early this morning saying that two thirds of the 18,000 predicted job losses would be in London.
DB employ 8,000 people in London
Expert indeed. If that's the type of expert the radio can drag up imagine what type of experts they've got at the Deutsche Banke.DB employ 8,000 people in London
German banks seem to be a source of debt for German industry instead of public shares. Are some of DB's native investments coming up a bit sour? Or are the lending to Greek supercar manufacturers and the like?
Henners said:
Burwood said:
Henners said:
Burwood said:
It's over for DB. Anyone any good will leave. Are they now a Retail bank
Yup.I know 4 people who were at DB, all very very good. They fled about 2 years ago.
kers. I remember colleagues standing in an open plan office telling 'jew' jokes. Laughing and taking the piss. True story, we had a New York guy over who wore a kippah. He heard these jokes and st you not he literally threw himself over the desks grabbed this guy and beat the st out of him in the office.That behaviour sounds like a broking shop; not what I witnessed when I was there in the early 2000's.#
Anyhoo,
It’s interesting that Libor rigging continually raises its head.
Whilst there were indeed abuses of benchmark setting, the real world impact was negligible – if anything. Libor rigging was a rates / FI derivative problem and nothing else. The action of rigging was fairly easy to spot, and blatant enough to pin the tail on the donkey. Equities, however is bearing the brunt here – although the reasons are multiple…..
If you look at other activities that banks are engaged in, Cum-Cum, Cum Ex, DTT enhancement, Structured Finance; the negative real world effects are far greater (reduction in tax receipts).
Historically, Deutsche (and other banks) would have lent heavily on legal opinions that such structures were “legal”; however it’s entirely possible that retrospective law change risks exist (ala Swiss tax ruling in 2015). The size of the potential spanking here is multi billions. There is an estimated EUR36bn in lost German tax receipts directly linked to these strategies – if at some point the German revenue goes after the banks for facilitation the potential hit is massive (and I know of people whom are getting their doors kicked in already in Frankfurt).
Equity trading is much more expensive to support (balance sheet, risk and liquidity costs); and reliant on directional and arbitrage trading strategies. Arbitrage strategies, whether relative value, regional, sector, tax or regulatory are finite in nature – and you don’t want to be carrying the baby when the music stops PARTICULARLY if the arbitrage was based on the later 2.
Libor rigging is more symptomatic of arrogance in the sector; and whilst and massive in size – is at the mickey mouse end of complexity / nefariousness (word?). If the tax structures blow up retrospectively; this action is a smart move (the house is cleaned). In fact I’ve heard openly that DB is co-operating with the Tax authorities after being raided last year. We’ve already seen Maple Bank wiped out with a 500m fine a few years ago – and they would be a tadpole in this space.
Anyhoo,
It’s interesting that Libor rigging continually raises its head.
Whilst there were indeed abuses of benchmark setting, the real world impact was negligible – if anything. Libor rigging was a rates / FI derivative problem and nothing else. The action of rigging was fairly easy to spot, and blatant enough to pin the tail on the donkey. Equities, however is bearing the brunt here – although the reasons are multiple…..
If you look at other activities that banks are engaged in, Cum-Cum, Cum Ex, DTT enhancement, Structured Finance; the negative real world effects are far greater (reduction in tax receipts).
Historically, Deutsche (and other banks) would have lent heavily on legal opinions that such structures were “legal”; however it’s entirely possible that retrospective law change risks exist (ala Swiss tax ruling in 2015). The size of the potential spanking here is multi billions. There is an estimated EUR36bn in lost German tax receipts directly linked to these strategies – if at some point the German revenue goes after the banks for facilitation the potential hit is massive (and I know of people whom are getting their doors kicked in already in Frankfurt).
Equity trading is much more expensive to support (balance sheet, risk and liquidity costs); and reliant on directional and arbitrage trading strategies. Arbitrage strategies, whether relative value, regional, sector, tax or regulatory are finite in nature – and you don’t want to be carrying the baby when the music stops PARTICULARLY if the arbitrage was based on the later 2.
Libor rigging is more symptomatic of arrogance in the sector; and whilst and massive in size – is at the mickey mouse end of complexity / nefariousness (word?). If the tax structures blow up retrospectively; this action is a smart move (the house is cleaned). In fact I’ve heard openly that DB is co-operating with the Tax authorities after being raided last year. We’ve already seen Maple Bank wiped out with a 500m fine a few years ago – and they would be a tadpole in this space.
Edited by stongle on Monday 8th July 11:06
I would agree that the impact of Libor on third parties may have been innocuous. Big surprise there was an issue with conflicts of interest when you move the rate setting guys next to the trading guys. I don't believe the Head trading guy was ever prosecuted and his name redacted. He had too much dirt on certain Board members. I still know people there and one who left perhaps 18 months ago was working on dealing with the st storm. The trader in question was earning 100M per year in bonuses. Didn't get so much as a slap on the wrist.
t storm. The trader in question was earning 100M per year in bonuses. Didn't get so much as a slap on the wrist.Yep, I know some of those involved in the trials and how the information flowed was a joke.
Its symptomatic of a profit at all cost mantra / management culture. Its rampant in the sector, and ultimately leads to massive blow ups. European banks are particularly terrible for this; and always seem to get caught with their pants down OR can kick down the road. It’s the same in the EC, ECB etc – take all the benefits up front and worry about the future later. You will end up with exacerbated whipsaw effects.
Pulling out of Equities might be the smart move for DB (and others may well follow); but I don’t think them removing themselves from the market will be any great de-risking action. Much of the business will go elsewhere; and it does little to stem flow of credit into peripheral public sector spending spree. It’s an odd world when un-rateable corporates probably have better credit than Sovereign states – particularly ones that the ECB, treats as pari-passu with Germany….
Its symptomatic of a profit at all cost mantra / management culture. Its rampant in the sector, and ultimately leads to massive blow ups. European banks are particularly terrible for this; and always seem to get caught with their pants down OR can kick down the road. It’s the same in the EC, ECB etc – take all the benefits up front and worry about the future later. You will end up with exacerbated whipsaw effects.
Pulling out of Equities might be the smart move for DB (and others may well follow); but I don’t think them removing themselves from the market will be any great de-risking action. Much of the business will go elsewhere; and it does little to stem flow of credit into peripheral public sector spending spree. It’s an odd world when un-rateable corporates probably have better credit than Sovereign states – particularly ones that the ECB, treats as pari-passu with Germany….
Digga said:
Stongle, thanks. Excellent post which TBF I follwed the gist of, but not 100% of the deals you refer to.
I think the key matter, as you say, is that one way or another, we're reaching an inflection point for the way banking is run.
As for reducing risk, I have long felt that most of the efforts - BoE, ECB and FEd - have done little (if anything) to actually cut potential crises but have inadvertently done a lot to make banks less financially stable and also less able to serve consumers and businesses. You only have to look at the pro-cyclical off-loading of loans in the GFC as one example.
Heres a fairly easy explain of the various types of trade and their deployment:I think the key matter, as you say, is that one way or another, we're reaching an inflection point for the way banking is run.
As for reducing risk, I have long felt that most of the efforts - BoE, ECB and FEd - have done little (if anything) to actually cut potential crises but have inadvertently done a lot to make banks less financially stable and also less able to serve consumers and businesses. You only have to look at the pro-cyclical off-loading of loans in the GFC as one example.
http://www.europarl.europa.eu/cmsdata/158435/2018-...
stongle said:
Digga said:
Stongle, thanks. Excellent post which TBF I follwed the gist of, but not 100% of the deals you refer to.
I think the key matter, as you say, is that one way or another, we're reaching an inflection point for the way banking is run.
As for reducing risk, I have long felt that most of the efforts - BoE, ECB and FEd - have done little (if anything) to actually cut potential crises but have inadvertently done a lot to make banks less financially stable and also less able to serve consumers and businesses. You only have to look at the pro-cyclical off-loading of loans in the GFC as one example.
Heres a fairly easy explain of the various types of trade and their deployment:I think the key matter, as you say, is that one way or another, we're reaching an inflection point for the way banking is run.
As for reducing risk, I have long felt that most of the efforts - BoE, ECB and FEd - have done little (if anything) to actually cut potential crises but have inadvertently done a lot to make banks less financially stable and also less able to serve consumers and businesses. You only have to look at the pro-cyclical off-loading of loans in the GFC as one example.
http://www.europarl.europa.eu/cmsdata/158435/2018-...
Got it, thanks. Very useful.
Digga said:
stongle said:
Digga said:
Stongle, thanks. Excellent post which TBF I follwed the gist of, but not 100% of the deals you refer to.
I think the key matter, as you say, is that one way or another, we're reaching an inflection point for the way banking is run.
As for reducing risk, I have long felt that most of the efforts - BoE, ECB and FEd - have done little (if anything) to actually cut potential crises but have inadvertently done a lot to make banks less financially stable and also less able to serve consumers and businesses. You only have to look at the pro-cyclical off-loading of loans in the GFC as one example.
Heres a fairly easy explain of the various types of trade and their deployment:I think the key matter, as you say, is that one way or another, we're reaching an inflection point for the way banking is run.
As for reducing risk, I have long felt that most of the efforts - BoE, ECB and FEd - have done little (if anything) to actually cut potential crises but have inadvertently done a lot to make banks less financially stable and also less able to serve consumers and businesses. You only have to look at the pro-cyclical off-loading of loans in the GFC as one example.
http://www.europarl.europa.eu/cmsdata/158435/2018-...
Got it, thanks. Very useful.
fblm said:
Digga said:
stongle said:
Digga said:
Stongle, thanks. Excellent post which TBF I follwed the gist of, but not 100% of the deals you refer to.
I think the key matter, as you say, is that one way or another, we're reaching an inflection point for the way banking is run.
As for reducing risk, I have long felt that most of the efforts - BoE, ECB and FEd - have done little (if anything) to actually cut potential crises but have inadvertently done a lot to make banks less financially stable and also less able to serve consumers and businesses. You only have to look at the pro-cyclical off-loading of loans in the GFC as one example.
Heres a fairly easy explain of the various types of trade and their deployment:I think the key matter, as you say, is that one way or another, we're reaching an inflection point for the way banking is run.
As for reducing risk, I have long felt that most of the efforts - BoE, ECB and FEd - have done little (if anything) to actually cut potential crises but have inadvertently done a lot to make banks less financially stable and also less able to serve consumers and businesses. You only have to look at the pro-cyclical off-loading of loans in the GFC as one example.
http://www.europarl.europa.eu/cmsdata/158435/2018-...
Got it, thanks. Very useful.
fblm said:
Burwood said:
...The trader in question was earning 100M per year in bonuses. Didn't get so much as a slap on the wrist.
AFAIK the only guy making close to those kind of bonuses got 5 years no? 
Henners said:
Burwood said:
It's over for DB. Anyone any good will leave. Are they now a Retail bank
Yup.I know 4 people who were at DB, all very very good. They fled about 2 years ago.
At risk of making sweeping generalisations, the Banking industry in London likes to label people as ‘very good’, pay them ridiculous amounts of money and the bank then goes under or needs to merge in order to survive, ideally with a Government.
It is a disease in London which started with big bang, the emperor had new clothes all along.
Anyone who has worked in these places will know, you see internal staff trying to throw each other under the corporate bus every minute of every day. Once you foster that type of internal culture at a European Bank it was never going to yield positive results.
When the CEO said in his statement that ‘DB had spread itself too thinly’, what he was really saying is ‘we entrusted the future profits of a prudent German bank with a bunch of over-paid coke fuelled Londoners who, were actually far less intelligent at making money than we expected them to be. Instead of reversing this decision, we stuck with this failing business model for another 10 years. Because, we like to pretend they are worth the money that we pay them.’
The 20 year experiment of Investment Banks paying staff members £250k-£2m in a hope that some of them hit the bullseye, some of them blindfolded, has ended in spectacular failure.
Over a 20 year period, DB Investment Bank earned less than zero profit. zero.
‘Yeah mate i got a few pals at DB and they are all s
t hot’Give me a break. Give us all a break and stop perpetuating this myth as that’s all it is.
sorry I reserve the right to a rant as events like this harm the other City workers like myself who don’t subscribe to their work culture and ethics.
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