Latest in-depth analysis from the IMF showed all the critical point of German national banking system. Perhaps the real critical point for economies
by Emanuele Bonini
Although it is the Italian banking system keeping markets, analysts and politicians with bated breath, the real threat comes from Germany. According to the Financial System Stability Assessment of the International Monetary Fund, network analysis suggests «a higher degree of outward spillovers from the German banking sector than inward spillovers». This because of two reasons: «the highest degree of interconnectedness» of the biggest lenders of the country on one hand, and the fact that Germany’s financial sector plays a key role in the global economy on the other hand. The country is home to two global systemically important financial institutions, Deutsche Bank AG and Allianz SE, and troubles in one of them pose systemic risks. Consequently, Germany’s contribution to ensuring the success of the new European financial stability architecture is crucial for fostering its domestic financial stability and the success of the European reform agenda. Even though the problem is mainly for Europe but not only for Europe.
Premising that national credit institutions in the global list of systemically important banks (G-SIBs) have huge imbalances which pose a serious problem from financial stability, the in-depth analysis pointed out that the highest degree of interconnectedness can be found between Allianz, Munich Re, Hannover Re, Deutsche Bank, Commerzbank and Aareal bank, with Allianz «being the largest contributor to systemic risks among the publicly-traded German financials». Most important, «both Deutsche Bank and Commerzbank are the source of outward spillovers to most other publicly-listed banks and insurers». Furthermore, the IMF warned that «among the G-SIBs, Deutsche Bank appears to be the most important net contributor to systemic risks». Something true especially within the Eurozone, where structural weaknesses are already reason of major concerns. Of course size and importance of German economy put at risk non-Eurozone partners, too.
Now, according to analysts from Washington D.C., given the situation and «given the likelihood of distress spillovers between banks and life insurers, close monitoring and continued systemic risk analysis by authorities is warranted». German Deutsche Bank decided to start a restructuring process to better guarantee the sustainability, with 188 branches ready to shut over in the next months. This is over a quarter of Deutsche Bank total offices operating in Germany. Officially the operation is explained by new forms of business. According to the official version provided by Deutsche Bank, technology and new services led to a growing number of customers doing their banking online. As a consequence, fewer people come to the branches to conduct business. Despite the official version, it appears clear how big is the non-performing loans issue surrounding the biggest German lender. A liquidity problem of huge size for a country where financial sector remains strongly bank-dominated.
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- Italy in troubles with banks because of... Italy
- Eurozone exposed to great shock, risk sharing needed
Although it is the Italian banking system keeping markets, analysts and politicians with bated breath, the real threat comes from Germany. According to the Financial System Stability Assessment of the International Monetary Fund, network analysis suggests «a higher degree of outward spillovers from the German banking sector than inward spillovers». This because of two reasons: «the highest degree of interconnectedness» of the biggest lenders of the country on one hand, and the fact that Germany’s financial sector plays a key role in the global economy on the other hand. The country is home to two global systemically important financial institutions, Deutsche Bank AG and Allianz SE, and troubles in one of them pose systemic risks. Consequently, Germany’s contribution to ensuring the success of the new European financial stability architecture is crucial for fostering its domestic financial stability and the success of the European reform agenda. Even though the problem is mainly for Europe but not only for Europe.
Premising that national credit institutions in the global list of systemically important banks (G-SIBs) have huge imbalances which pose a serious problem from financial stability, the in-depth analysis pointed out that the highest degree of interconnectedness can be found between Allianz, Munich Re, Hannover Re, Deutsche Bank, Commerzbank and Aareal bank, with Allianz «being the largest contributor to systemic risks among the publicly-traded German financials». Most important, «both Deutsche Bank and Commerzbank are the source of outward spillovers to most other publicly-listed banks and insurers». Furthermore, the IMF warned that «among the G-SIBs, Deutsche Bank appears to be the most important net contributor to systemic risks». Something true especially within the Eurozone, where structural weaknesses are already reason of major concerns. Of course size and importance of German economy put at risk non-Eurozone partners, too.
Now, according to analysts from Washington D.C., given the situation and «given the likelihood of distress spillovers between banks and life insurers, close monitoring and continued systemic risk analysis by authorities is warranted». German Deutsche Bank decided to start a restructuring process to better guarantee the sustainability, with 188 branches ready to shut over in the next months. This is over a quarter of Deutsche Bank total offices operating in Germany. Officially the operation is explained by new forms of business. According to the official version provided by Deutsche Bank, technology and new services led to a growing number of customers doing their banking online. As a consequence, fewer people come to the branches to conduct business. Despite the official version, it appears clear how big is the non-performing loans issue surrounding the biggest German lender. A liquidity problem of huge size for a country where financial sector remains strongly bank-dominated.
Related articles:
- Italy in troubles with banks because of... Italy
- Eurozone exposed to great shock, risk sharing needed
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