Posted on 10/02/2016 4:16:01 PM PDT by Mariner
While it now seems that Friday's rumor of a substantially reduced Deutsche Bank settlement with the DOJ, which sent the stock price soaring from all time lows, was false following a FAZ report that CEO John Cryan has not yet begun the renegotiation process, and in the "next few days" is set to fly to the US to discuss the proposed RMBS misselling settlement with the US Attorney General, Germany's largest lender continues to be impacted by the public's declining confidence, exacerbated over the weekend by a disturbing "IT glitch."
For one, it remains unclear if Friday's report halted, or reversed, the outflow of cash from DB's prime brokerage clients, which as Bloomberg first reported last week was a major catalyst for the swoon in the stock price. However, as UniCredit's chief economist Erik Nielsen notes in a Sunday notes, one thing is certain: "so long as a fine of this order of magnitude ($14 billion) is an even remote possibility, markets worry."
There is also the threat of the bank's massive derivative book, which despite attempts of many pundits to gloss over, over the weekend none other than JPM admitted that that is what the markets will likely be focusing on for the foreseeable future: "In our opinion it is not so much funding issues but rather derivatives exposures that more likely to trouble markets going forward if Deutsche Bank concerns continue. This is especially true if these concerns propagate into a confidence crisis inducing more rapid unwinding of derivative contracts."
Indeed, as we first hinted last Thursday...
(Excerpt) Read more at zerohedge.com ...
Then you should have no trouble giving me all my money today.
Right?
IICAN problems perhaps?
Another Greece, eh??? Merkel has really left a mark on Germany...so to speak.
“IT glitch” is the new “the check is in the mail.”
"As soon as we fix our IT glitch".
Who knew that collateralizing an international banking conglomerate on derivatives in excess of the GDP of most of the developed countries in the world during times of a world wide economic down turn and an Obama administration was a bad thing?
Very surprising. It sounds like a good idea, but the fact it doesn’t work out, is probably due to an IT glitch.
Merkel is illary’s fave foreign pol.
It really depends on the terms and conditions of the derivatives contracts. There may be penalties if you want to unwind them. Conversely, DB may have to put up more collateral if its credit rating falls.
Nobody knows what is in these contracts, except for DB.
Very quick - excellent
I'll say it once: "Your 'money in the bank' is electrons. All it takes is a phone call to the IT guy in the back, and you ain't got no money."
“...a disturbing “IT glitch.””
All the IT guys figured out what was going on and decided to take their share before they split?
Monday is a bank holiday, I think.
DB and the counter party.
Events may have already taken place which executed DB. We'll not know for a week or two.
Derivatives are constructed in every conceivable fashion. You could probably construct and sell a derivative on whether the Giants will win another world series and there's no controlling legal authority that says you can't.
And that's not a business a consumer deposit and loan bank ought to be in.
A case of Wild Turkey is also most valuable.
...a skidmark.
1. DB is far from a consumer deposit and loan bank.
2. While each counterparty knows what is in their own contract, they have no idea to what extent DB has hedged the risk. I may know that DB has to pay me 1.1 million Euro a month if the central bank rate goes above .5%, but I have no idea if somebody else has to pay them 1.2 million Euro a month if the central bank rate goes above .5%.
That's the problem.
Those holding the risk may want to make them produce against contract. You know, just to prove they can.
The big question in the world of international finance right now is: Can they produce? And: Will the German government bail them out?
If either of those is "no", the bank is in trouble because it appears the big money may be running from them.
If both are "no", they're already dead.
You can’t do that. If the contract says they will pay you if the central bank rate goes above .5%, you won’t find out if they can or not until the bank rate hits .5% - unless there is a clause saying they have to put up some sort of escrow or collateral if their credit rating is cut to junk. Most people buying this sort of derivative don’t have that kind of clause, if it is a regular wholesale customer, although another financial institution might be have a little more foresight (and cynicism).
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