Wednesday, 13 July 2016

Deutsche Bank - the sick bank

EU Banks Need $166 Billion, Deutsche Bank Economist Tells Welt

  • Europe needs the bailout fund to recapitalize its banks
  • David Folkerts-Landau told Welt Europe was "extremely sick"

11 July, 2016

Europe urgently needs a 150 billion-euro ($166 billion) bailout fund to recapitalize its beleaguered banks, particularly those in Italy, Deutsche Bank AG’s chief economist said in an interview with Welt am Sonntag.

"Europe is extremely sick and must start dealing with its problems extremely quickly, or else there may be an accident," Deutsche Bank’s David Folkerts-Landau said, according to the newspaper. "I’m no doomsday prophet, I am a realist."

With Italian banks weighed down by 360 billion euros of soured loans, the government has been sounding out regulators on ways to shore up lenders amid a renewed selloff after Britain voted to leave the European Union.  

Lorenzo Bini Smaghi, a former member of the European Central Bank’s executive board who now chairs Societe Generale SA, said Wednesday that Italy’s banking crisis could spread to the rest of Europe and rules limiting state aid to lenders should be reconsidered to prevent greater upheaval.

"I do not expect a second financial crisis like in 2008," Folkerts-Landau said, according to Welt. "The banks are much more stable today and have more equity. What we face this time is a slow, long downward spiral."

The Bloomberg Europe 500 Banks and Financial Services Index has tumbled 33 percent this year, falling to the lowest level in more than seven years on Thursday. Deutsche Bank’s stock price has fallen 48 percent during that period.

Folkerts-Landau said he had recently bought 100,000 Deutsche Bank shares and was optimistic about the outlook for his employer.

BlackRock Inc. Vice Chairman Philipp Hildebrand said earlier this month the European Commission should allow governments to take temporary equity stakes in their banks, similar to what the U.S. did with its Troubled Asset Relief Program during the 2008 crisis.

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