"When some kind of "bad bank" is created, my "alarm button" is triggered", economist and best-selling author Marc Friedrich said. As The Financial Times and Reuters recently reported, Deutsche Bank intends to invest long-term derivatives of up to 50 billion euros, which have not brought any income recently, into some internally created structure – a so-called "bad bank" – or sell these derivatives to this structure.
"When some kind of a "bad bank" is created, my "alarm button" is being triggered", an economist and best-selling author Marc Friedrich said. As The Financial Times and Reuters recently reported, Deutsche Bank intends to invest long-term derivatives of up to 50 billion euros, which have not brought any income recently, in some internally created structure – the so-called "bad bank" – or to sell these derivatives to this structure.
Get Rid of New Corpses
"Thus, Deutsche Bank pursues to get rid of the "new corpses"...Once they have already done this, and then the amount was more than 120 billion euros. Deutsche Bank is struggling to survive, Friedrich said."
The financial institution has huge problems. The bank has extremely large expenses and zero interest rates mean revenues will collapse. These issues are compounded by an American market, which is not very good for Deutsche Bank. So now management is trying to somehow improve the balance sheet.
In his book "The Crash is the Solution" published in 2014, Marc Friedrich already puts forward a theory that the Deutsche Bank is "de facto broke". He adheres to the same opinion to this day:
"This is just an attempt to gain time. Now the market capitalization is only 12.5 billion euros, which is ridiculous for a bank. 50 billion euro derivatives will now be removed from the balance sheet but this is really just an attempt to delay bankruptcy. If the bank falls below a rate of five euros, then perhaps the "mother state" will have to come and nationalise it, because for the system the bank is important. This means that in the end, we – the citizens – will still have to pay for it. And the government intervention through Commerzbank has failed".
Unprecedented Financial Crash
The financial expert Marc Friedrich pointed to derivatives held outside the Deutsche Bank balance sheet: "We are talking about more than 40 trillion euros. That is 16 times the GDP of Germany". In his opinion, the collapse of Deutsche Bank would be a "huge problem" for the state and its citizens.
"If that happens, it could trigger a financial crash that the world has not yet seen. Compared to it, Lehman Brothers bankruptcy will seem like a childish prank".
Friedrich has long advised his clients the following:
"If you are a customer of Deutsche Bank, you should be very careful and it is best to change the bank. This is a "sinking ship", and it may happen that all depositors would rush to collect their money. It is better not to keep large sums in this bank".
According to Friedrich, the possible collapse of Deutsche Bank will have no analogues in history. And this should also be a warning signal to every investor and customer of Deutsche Bank.