The market punishes the banks again this Friday and they focus on Deutsche Bank. It is the largest private bank in Germany and one of the 20 largest in the world by asset management.
Founded in Berlin 153 years ago, the institution is systemically important, according to the US Financial Stability Board. In other words, it is too big to fail as its collapse has the potential to trigger a financial crisis.
Deutsche Bank has assets under its management valued at 1.4 trillion dollars. To put it in perspective, this is equivalent to all the goods and services that Mexico produced over the past year, according to the Gross Domestic Product (GDP) estimated by the International Monetary Fund (IMF).
Announcement impacts financial sector stability
The institution announced this Friday that plans to redeem, in advance, a debt for one thousand 500 million dollars whose maturity was until 2028, because he assured that he has “all the required regulatory approvals” for that decision.
However, following the announcement, some investors are speculating about Deutsche Bank’s Credit Risk Swap (CDS), Monex experts said this morning.
The CDS is insurance purchased by investors to protect themselves in the event of a default on payments. In this case, the cost of insuring against a Deutsche Bank default hit 220 basis points on Friday and was its highest level in five years, since 2018, according to data from SyP Market Intelligence.
This is because the Deutsche Bank decision raised questions about the stability of banks with high exposure to corporate loans.
Since the failure of Silicon Valley Bank two weeks ago and the near collapse of the giant Credit Suisse, there is uncertainty about the stability of the financial sector in the United States and Europe.
Deutsche Bank shares fell 6.3% on the Frankfurt Stock Exchange and 5.6% on the New York Stock Exchange, although earlier they sank more than 10%, according to figures from the Bloomberg agency.
Deutsche Bank today has a market capitalization of 375 billion pesos, taking into account an exchange rate of 19 units per dollar.
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