The banking crisis that started from America’s Silicon Valley Bank is now fast spreading to other parts of the globe. After the Silicon Valley Bank, America’s Signature Bank, Credit Suisse Bank of Switzerland already bore the brunt. Now this banking crisis seems to have its impact on lenders in Germany. Germany’s largest bank Deutsche Bank is grappling with financial trouble now.
Deutsche Bank shares plummet up to 8 percent
On Friday, the bank saw a big decline of about 8 percent in its stock price. An atmosphere of uncertainty looms over the entire banking system in Europe post Silicon Valley Bank saga. While there has bee a sustained selling in the shares of Deutsche Bank for the last three days till Friday, Credit-default swaps, used to insure against the bank’s default, soared to levels not seen since 2020. Over the last one month, there has been a huge decline of 24 percent in the shares of the Germany’s largest bank.
According to the Spectator Index, Deutsche Bank has total assets of $1.4 trillion. It posted a total profit of $6 billion in the year 2022.
What is ailing the Deutsche Bank?
Shares of Deutsche Bank were down by more than 15 percent intraday on Friday. After reclaiming some of its lost ground, it closed at 8.54 euros with a total decline of 8 percent.
It is worth noting that the decline in the bank’s shares is not only due to the huge pressure on global banks, but the cost of credit-default swap insurance of the bank has risen manifold as compared to the year 2020. In such a situation, distrust is there among the shareholders of the bank and the selling of shares has gathered pace. Credit-default swap insurance is a type of insurance that banks provide to a company or brand in lieu of default.
Amid reports of the Deutsche Bank crisis, Germany’s Chancellor Olaf Scholz has said that his country’s banking system is completely safe and investors should not panic. Actually, Deutsche Bank is the largest bank in Germany. It has an important role in the country’s economy.
