2023 Banking Crisis (General)

by dan, Saturday, March 25, 2023, 14:39 (485 days ago) @ dan

Of course it's not over. When you have a world economy based on credit and debt with collapsing currencies, shit's going to happen.

Deutsche Bank Collapse Risk Grows As Experts Wait for Next 'Domino to Fall'

"We are still on edge waiting for another domino to fall, and Deutsche is clearly the next one on everyone's minds (fairly or unfairly)," Chris Beauchamp, chief market analyst at IG Group, told Reuters. "Looks like the banking crisis hasn't been entirely put to bed."

But what's happening with Deutsche Bank? This article tries to explain it, but clearly there are things happening behind the scenes that aren't making it into the press.

Deutsche Bank Should Disclose Its Current Liquidity Levels To Investors

This is telling:

Nothing new, in particular, came out about Deutsche Bank today. It is not as if market participants only discovered today that Deutsche Bank has a long history of weak risk controls and a list of scandals rivaling Credit Suisse.

So it's an ongoing risk that is coming to fruition.

What investors should be monitoring for all banks is how liquid they are, that, is whether they can pay all their obligations when they come due. It is difficult, if not impossible to know, how liquid Deutsche Bank is right now.

How liquid they are, i.e., how much wealth do they actually have in hand, either cash or something they can turn into cash immediately. The problem is not with the cash the banks are holding, even though it's losing value by the hour to inflation, it's other liquid assets like bonds and equities that can only be turned into cash at a loss right now.

According to Deutsche Bank’s Basel III Pillar III Risk Disclosures, as of the end of December 2022, Deutsche Bank’s Liquidity Coverage Ratio was 135%, higher than the minimum requirement of 100%. The figure tells us that at that end of 2022, Deutsche Bank had enough high-quality liquid assets such as cash, money market instruments, and unencumbered investment grade bonds, to cover net cash outflows in periods of stress.

Maybe that's where the problem is. WTF are money market instruments? Well, here's a definition:

Money market instruments are securities that provide businesses, banks, and the government with large amounts of low-cost capital for a short time. The period is overnight or a few days, weeks, or even months, but always less than a year. The financial markets meet longer-term cash needs.

So, it's credit, i.e., the ability to take on more debt. And bonds, they have bonds, in a market that isn't bond friendly. So they have cash, but we don't know how much, the ability to borrow more money short term, and bonds that can be sold at a loss. Great.

Unlike Silicon Valley Bank, Deutsche Bank has a diversity of funding sources such as retail and corporate deposits from different geographies, short-term and medium-term credit lines, as well as access to wholesale funding. Stable sources of funding are always important, especially right now.

OK, so they have deposits from a more diverse set of stakeholders, depositors that can demand their money at any time, and access to more credit, or debt. So... what do they have?

What Deutsche Bank should be doing right now is disclosing granular information about its current liquidity levels, sources of funding, and capital ratios.

Don't hold your breath.


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