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The Nomad Economist: What if Deutsche Bank Derivatives Bubble Suddenly Implode into a Financial Black Hole?

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The Nomad Economist
Oct 22, 2022

Deutsche Bank is to Germany is what Wells Fargo is to the US .it just does not stop at one scandal, there is another and another and another.

Today, Deutsche Bank was convicted of derivatives transactions in Italy. An Italian court convicted 13 former bankers from Deutsche Bank, Nomura, and Monte dei Paschi di Siena on Friday over derivative transactions that prosecutors say helped MPS the world’s oldest bank conceal huge losses.

The verdict also ordered the seizure of 64 million euros, about $70.5 million, from Deutsche Bank and 88 million euros from Nomura as part of the sentence. Monte dei Paschi reached a settlement of 10.6 million euros with the court in 2016.

The case centers on two controversial derivatives deals, known as Alexandria and Santorini, that Nomura and Deutsche Bank arranged for Monte dei Paschi in 2009. Prosecutors said the deals helped Monte Dei Paschi, which was founded in 1472 and is Italy’s fourth-biggest lender, hide more than 2 billion euros of losses it racked up after the costly acquisition of a smaller rival in 2008.

Monte dei Paschi’s managers were accused of colluding with Deutsche Bank and Nomura bankers to hide losses at the Italian lender by using complex derivatives trades, dubbed Santorini, and Alexandria, that led to a misrepresentation of its finances between 2008 and 2012.

Deutsche bank should be allowed to collapse; they’re a failed venture, it’s not in the capitalist system to save failed businesses and the consequences for the common man from paying those bailouts have been catastrophic.

Europe’s biggest investment bank Deutsche Bank is technically bankrupt.And of course for everyone who knows Deutsche bank is the bank for derivatives trading. We are talking about derivatives contracts in the value range of quadrillions of dollars — not millions, not billions, not trillions of quadrillions.

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And derivatives contracts are at the very core outright gambling. Deutsche Bank is in big trouble. If its bankruptcy becomes true, it will be the end of the financial system as we know it. And as the big banks are highly leveraged, and they are interdependent. If one major bank fails, a lot of others are going to fall like dominoes.

Deutsche Bank could not collapse without causing a domino effect and taking with it the whole financial system. it’s also a harbinger of a bigger problem with European banks in general and the Italian bank in particular, which are loaded with trillions of euros in non-performing bank loans .

They haven’t been able to shed since the crisis of 2008 and subsequent eurozone double-dip recession of 2011. The European banks and insurers have lost dramatic amounts of ground with only one still ranking in the top 20 globally by market value .compared with six before the financial crisis.

Deutsche Bank president Carl von Rohr said before yesterday at Bloomberg’s Future of Finance conference in Frankfurt: while challenges abound from an erratic trade war to Brexit to unrest in Hong Kong and Chile they pale in comparison with the headwinds for banks from low and negative rates he said.

https://www.youtube.com/watch?v=-MHQENdSK2k

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