USA: Emergency meeting of the Financial Stability Board

US Treasury Secretary Janet Yellen has called a meeting of top US financial regulators as newfound problems at Deutsche Bank point to a widening banking crisis that has spread from the US to Europe, Bloomberg reported Friday.

The report said no meeting time has been given for the so-called Financial Stability Oversight Board (FSOC), a body overseen by the Treasury Department, and discussions will be closed to the public.

its shares Deutsche Bank fell sharply on Friday, Which indicates the possibility of transmission from the United States to EuropeAmidst what was described as the high cost of insuring the debts of the German lender against default.

FSOC members include the chairs of the Federal Reserve, the Federal Deposit Insurance Corporation (FDIC), and several other regulatory agencies.

American regulators They’ve been pressured Providing greater clarity on their willingness to insure uninsured bank deposits after the collapse of the Silicon Valley bank, which collapsed due to a sudden influx of capital.

What analysts “think” about Deutsche Bank

the Deutsche Bankwhich has returned to the path of recovery in recent years after a series of crises, was the biggest loser in shares of major European banks on Friday, despite announcing that it plans to buy back bonds, a move usually interpreted as a sign of strength.

Analysts struggle to determine the reason behind today’s massive sell-off, which prompted German Chancellor Olaf Scholz to issue a public statement in support of the financial institution, stating that “This is a very profitable bank and there is no reason to question its future…”.

On Wednesday, the head of Germany’s banking regulator BaFin said that while there were no immediate risks to European banks from the recent turmoil in the industry, it There is a risk of “crisis contagion through market psychology”.

“It is clear that the market sells first and then asks,” he stressed. Paul de la Baumea FlowBank Analyst.

With markets soured, Deutsche Bank’s show of strength declined as investors seemed to interpret it as a “sign of weakness”. Deutsche Bank’s announcement of the buyback of the subordinated notes came on the first day the bank could make such an announcement. But instead of fostering a climate of trust towards her, Their CDS rates have gone up.

according to bloombergThe collapse of Deutsche Bank erased the stock’s six-month gain. Investors were concerned about the German bank’s exposure to US commercial real estate and its large derivatives portfolio, according to Stuart Graham, an analyst at Autonomous Research. but, Both of these parameters are “known” and “not so scary.”added in a note.

The German bank recently completed a four-year restructuring program that included, among other things, cutting thousands of jobs and exiting the investment arm. CEO Christian Swing, who took over in 2018, even considered a merger with rival Commerzbank in 2019 at the government’s urging, only to ultimately reject that scenario.

“We are not worried about Deutsche’s viability or its assets.”Graham Books. “To be absolutely clear – Deutsche Bank is not the next Credit Suisse.”

“Deutsche Bank has had its troubles with regulators, seen choppy financial results and undergone a restructuring process. The essential difference with Credit Suisse is that Deutsche has returned to profitability in recent quarters, while the Swiss bank has no profitability forecast for 2023,” Bloomberg comments. Paul van der WesthuizenAnalyst at Dutch bank Rabobank.

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