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Published: Mar 27, 2023
Updated: Mar 27, 2023

Financial instability looms as Deutsche Bank troubles persist

The global financial markets open with a green signal in Asian indices. However, the stability of banks remains a concern worldwide. This article discusses the impact of Deutsche Bank's troubles on the European markets and the views of various experts on the risks to financial stability.

Deutsche Bank's Troubles:

Deutsche Bank's troubles have escalated, with its CDS jumping to the highest level, causing panic in the market. Its US-listed shares were down 3.1% on Friday and down more than 20% this month, and its CDS jumped more than 300 bps in two days. The bank's announcement of the redemption of $1.5 billion in tier 2 notes due in 2028 further added to the market's panic.

Expert's Views:

The ECB President, Christine Lagarde, assured EU leaders that the financial system was equipped to provide liquidity if needed. IMF Chief Kristalina Georgieva has called for continued vigilance as risks to financial stability have increased. US President Biden also added that the FDIC could guarantee deposits above $250,000 if other banks fail.

Bank's Dependency on the Fed:

Banks are still drawing on the Fed for $164bn of emergency cash. Fed data shows that nearly $100bn in deposits were pulled last week. The US government is mulling over more support for banks while giving First Republic more time.

Commercial Real Estate Debt:

JP Morgan reports that $1.5 trillion in commercial real estate debt is maturing in the next three years. Commercial real estate could be the next big problem for America.

Global markets open on positive note ; but future seems bleak amid banking industry troubles

As the global markets open with a positive note, the stability of banks, particularly Deutsche Bank, remains a concern. The views of experts suggest continued vigilance to maintain financial stability. The dependence of banks on the Fed's emergency cash and the massive commercial real estate debt maturing in the next three years could create further financial instability