Print 
PDF
BookmarkWhy ‘radioactive’ Deutsche Bank could go nuclear at any time, experts warn
TROUBLED Deutsche Bank’s huge exposure means the firm could have a devastating impact on Europe’s financial system if it were allowed to fail, experts have warned.Deutsche GETTY
Deutsche Bank’s share price has fallen dramatically in 2016
Germany’s biggest bank reportedly has a $45 TRILLION (£34trn) portfolio of underlying assets that its clients are taking a position in – which equates to more than 10 times Germany’s entire GDP.
And the problem is that no one really knows what’s makes up Deutsche’s book of exposure and so-called derivatives book because it’s so opaque and complicated, according to Michael Hewson, chief market analyst at CMC Markets UK.
He told Express.co.uk: “Deutsche has the biggest derivatives book in the world, and people will say that its hedged to a greater or lesser extent, but it’s the interconnectedness with the rest of the system that is the problem.
“There doesn’t seem to be transparency about what’s in its book. No one really knows what the ripple-out effects would be.
“That makes Deutsche radioactive about whether or not I would want to invest in it.”
Angela Merkel has said the government would not provide state bail outs for banks
A bank becomes a risk to the financial system as a whole when the degree to which it is interconnected with other institutions increases.
Deutsche Bank is currently a counterparty to virtually every major bank in the world, in virtually all asset classes.
Deutsche Bank denies it has the biggest derivatives exposure – its portfolio of financial contracts based on the value of other assets – and insists that 85 per cent of its exposure is to investment grade counter-parties.
Investor confidence in Deustsche has been shaken over the last two days after German Chancellor Angela Merkel said it would not step in to rescue the bank if needed.
But experts claim Berlin could be left with little choice but to intervene.
By Lana Clements
9/29/2016
