{"id":35492,"date":"2018-06-26T06:15:38","date_gmt":"2018-06-26T11:15:38","guid":{"rendered":"http:\/\/olduvai.ca\/?p=35492"},"modified":"2018-06-26T06:15:38","modified_gmt":"2018-06-26T11:15:38","slug":"deutsche-banks-troubles-raise-worries-about-the-future-of-the-euro-zone","status":"publish","type":"post","link":"https:\/\/olduvai.ca\/?p=35492","title":{"rendered":"Deutsche Bank’s Troubles Raise Worries About the Future of the Euro Zone"},"content":{"rendered":"
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DEUTSCHE BANK\u2019S TROUBLES RAISE WORRIES ABOUT THE FUTURE OF THE EURO ZONE<\/a><\/h3>\n<\/div>\n<\/header>\n
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The euro banking sector is huge: In April 2018, its total balance sheet amounted to 30.9 trillion euro, accounting for 268 per cent of gross domestic product (GDP) in the euro area. Unfortunately, however, many euro banks are in lousy shape. They suffer from low profitability and carry an estimated total bad loan exposure of around 759 billion euro, which accounts for roughly 30 per cent of their equity capital.<\/p>\n

Share price developments suggest that investors have lost quite some confidence in the viability of euro banks\u2019 businesses: While US bank stocks are up 24 per cent since the beginning of 2006, the index for euro-area bank stocks is still down by around 70 per cent. Perhaps most notably, \u2019Germany\u2019s two largest banks, Deutsche Bank and Commerzbank, have lost 85 and 94 per cent, respectively, of their market capitalization.<\/p>\n

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With a balance sheet of close to 1.5 trillion euro in March 2018, Deutsche Bank accounted for around 45 per cent of German GDP. In international comparison, this an enormous, downright frightening dimension. It is mostly the result of the bank still having an extensive (though not profitable) footprint in the international investment banking business. The bank has already started reducing its balance sheet, though.<\/p>\n

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Beware of big banks \u2014\u00a0this is what we could learn from the latest financial and economic crises 2008\/2009. Big banks have the potential to take an entire economy hostage: When they get into trouble, they can drag everything down with them, especially the innocent bystanders \u2013 taxpayers and, if and when the central banks decide to bail them out, those holding fiat money and fixed income securities denominated in fiat money.<\/p>\n

Banking Risks<\/strong><\/p>\n

For this reason, it makes sense to remind ourselves of the fundamental risks of banking \u2013 namely\u00a0liquidity risk<\/em>and\u00a0solvency risk<\/em>\u00a0\u2013, for if and when these risks materialise, monetary policy-makers can be expected to resort to inflationary actions.<\/p>\n

\u2026click on the above link to read the rest of the article\u2026<\/p>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

DEUTSCHE BANK\u2019S TROUBLES RAISE WORRIES ABOUT THE FUTURE OF THE EURO ZONE The euro banking sector is huge: In April 2018, its total balance sheet amounted to 30.9 trillion euro, accounting for 268 per cent of gross domestic product (GDP) in the euro area. Unfortunately, however, many euro banks are in lousy shape. They suffer […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[2],"tags":[61,7380,1839,281,8814,285,13348],"class_list":["post-35492","post","type-post","status-publish","format-standard","hentry","category-economics","tag-banking","tag-cobden-centre","tag-deutsche-bank","tag-europe","tag-european-banks","tag-eurozone","tag-thorsten-polleit"],"_links":{"self":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/35492","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=35492"}],"version-history":[{"count":1,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/35492\/revisions"}],"predecessor-version":[{"id":35493,"href":"https:\/\/olduvai.ca\/index.php?rest_route=\/wp\/v2\/posts\/35492\/revisions\/35493"}],"wp:attachment":[{"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=35492"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=35492"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/olduvai.ca\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=35492"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}