Ngot away with it. The bank quake that began a few weeks ago with the collapse of the Silicon Valley Bank in the USA, hit other medium-sized banks, spilled over to Europe with Credit Suisse and also shook Deutsche Bank for a day, the global tremor, it has weakened . But the danger is far from over. The best proof of this is the American regional bank First Republic, which has also recently experienced severe turbulence. After the share price dropped by more than 50 percent last week, the bank is now being taken over by the American investment bank JP Morgan.
With the comparatively good quarterly figures of Commerzbank and Deutsche Bank, despite all the uncertainty, concerns about the next imminent financial crisis in Germany have not been able to take root in the long term. The price drop at Deutsche Bank, allegedly the result of an attack by short sellers, shows that individual institutions and the system as a whole are vulnerable.
Commercial real estate as the new problem child
The fabric real estate business in the USA is a cause for concern, an apparently unglamorous but very lucrative pool of investor funds of all kinds for a long time. The largest lenders here include US regional banks, which are now faced with the challenge of having to provide follow-up financing. The customer’s problem: the significantly higher interest rates and the simultaneous fall in real estate valuations. A mix that could yet prove toxic – especially if interest rates in the US continue to rise on the back of still unresolved inflation. Deutsche Bank is also involved in this financing in the USA. About half of its €33 billion commercial real estate portfolio is located in the American market. So investors have good reason to be nervous, even if management tried to capture the jitters when the quarterly figures were presented last week. The office properties that are currently the focus of particular attention are in good locations.
The so-called credit default swaps, i.e. credit default insurance, show how volatile the nervousness is despite all attempts to calm things down. The premiums to be paid had risen significantly again in the past few weeks, but have now fallen again somewhat. The sentence by Deutsche Bank Christian Sewing from the Corona period, according to which banks should now be part of the solution and no longer part of the problem, seems hollow in view of the turbulence.
Shadow banking is a big risk
However, the risk of a crisis on the financial markets has long ceased to come from the banks alone. The supervisors who have kept the systemically important banks so tight on a leash since the financial crisis of 2008 and 2009 have long since focused on a new problem area: the so-called shadow banks. This is what financial institutions are called that play billions of dollars on the financial markets with financing and money transactions, but are not sufficiently caught by the radar of the meticulous bank supervisors. These include hedge funds, money market funds and private equity. The dimension is huge. The latest figures from the Basel-based Financial Stability Board show that the assets held by shadow banks now account for half of the global volume
The danger posed by these players is not new. Elke König, the longtime head of the European bank resolution authority who recently retired, brought this problem up on the table back in 2012. “We can no longer take our time with the regulation of shadow banks,” she said at the time as President of the German supervisory authority Bafin. Ironically, the shadow banking market had developed rapidly, mainly as a result of the financial crisis: banks were strictly regulated, so what could be more obvious than outsourcing risky activities to non-regulated institutions?
The European Central Bank and the International Monetary Fund have only addressed the problem in the past few days, but have not yet presented any proposals for a solution. That could still prove fatal. A classification of the shadow banks as “systemically important” would be a necessary first step in view of their market power. The clock is ticking.
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