Now the giant Deutsche Bank collapses and revives European fears of the financial crisis

The second largest European bank, Commerzbank, from Germany, also fell. The reasons.

The first German bank and one of the first in Europe, the German giant Deutsche Bank, had a black day this Friday.

At European noon, its shares fell 12% on the Frankfurt Stock Exchange after losing 14%.

The bank has been one of the most targeted since Silicon Valley Bank blew up in the United States and especially since last week the Swiss government forced UBS to buy Credit Suisse, an operation between the two largest Swiss banks that caused financial tremors. in Europe.

The first German bank and one of the first in Europe, the German giant Deutsche Bank, has a Black Friday. Photo: Reuters

While European leaders, with the presence of the president of the European Central Bank Christine Lagarde, debated in Brussels at a previously scheduled summit on the competitiveness of the bloc’s economy in the face of massive US and Chinese subsidies and on issues such as the war in Ukraine or migrations, Deutsche Bank gave alarming signs.

A message of calm will come out of the summit for the financial markets, but they do not seem to be clear about the situation of many entities in view of the stock market performance of Deutsche Bank.

Why does it fall?

The fall this Friday is due to the increase in the cost of insurance against the risk of default of the German giant. A rise in those insurances means that markets see increases in the probability of that default.

Nobody really expects the bank to fail because both the German government and the European Union have mechanisms to keep it afloat, although its size would be a challenge even for German coffers.

The bad news for the German government is that the second major European bank that fell the most this Friday was precisely the second German bank, Commerzbank.

Shortly after noon in Europe, the continent’s stock markets went down, but the drop was relatively minor.

Frankfurt, Paris, London, Milan and Madrid were around losses of 2%. The banking sector did lose more. Its main index, the Stoxx Europe 600, dropped 5% because this increase in the cost of insuring against default was experienced by other European banks, although none at the level of Deutsche Bank.

The lessons of 2008

The financial crisis that broke out in 2008 left lessons, such as that the rise in the price of these insurances was one of the best indicators to measure the fear of the financial markets regarding the real situation of the banks.

Based on those instruments, Deutsche Bank has a 27.4% probability of default in the next five years. Rivals of similar size such as the British Barclays and Société Générale have moved between 10% and 15% in recent weeks.

Pending the message that comes out of the European summit, the president of the supervisory branch of the European Central Bank, the Italian Andrea Eria, said this Friday that European banks are solid, that they have sufficient liquidity buffers and that depositors do not They have doubts about their strength.

Brussels, special for Clarín

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