Tags: mohamed el-erian | deutsche bank | lehman | moment

El-Erian: Market to Dodge Lehman Moment on Deutsche Bank Woes

Image: El-Erian: Market to Dodge Lehman Moment on Deutsche Bank Woes

Thursday, 06 Oct 2016 09:54 AM

Mohamed El-Erian said the struggles of Deutsche Bank AG could pose a threat to expansion in the European economy even if the danger isn’t as severe as the worldwide freeze of credit markets in 2008 after the failure of Lehman Brothers Holdings Inc.

“It is not a Lehman moment. It is not a situation that ends up causing a sudden stop to the global economy in which growth collapses, trade collapses,” El-Erian, Allianz SE’s chief economic adviser, said Thursday in an interview on Bloomberg Television. “Why? First, the rest of the banking system, particularly in the United States, is stronger. Second, Deutsche Bank actually has liquidity and has access to the ECB,” or European Central Bank.

Deutsche Bank stock has plunged by almost half this year amid concerns that the costs to resolve regulatory probes will erode the company’s financial strength as Chief Executive Officer John Cryan also contends with tougher capital requirements and diminished trading revenue. Bloomberg News reported last week that some hedge funds moved to reduce their financial exposure to Deutsche Bank, Germany’s largest lender.

“There is uncertainty,” especially about the company’s hard-to-value assets, said El-Erian, who is also a Bloomberg View columnist, adding that he’d like to see improved transparency. “If we’re not careful, it is going to create another headwind to European growth. It is a warning that Deutsche Bank needs a new business model.”

Cryan plans to eliminate thousands of jobs as part of an overhaul announced last year to help boost profitability. He told Germany’s Bild newspaper last week that he doesn’t plan to raise capital and ruled out government assistance.

 

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Mohamed El-Erian said the struggles of Deutsche Bank AG could pose a threat to expansion in the European economy even if the danger isn't as severe as the worldwide freeze of credit markets in 2008 after the failure of Lehman Brothers Holdings Inc.
mohamed el-erian, deutsche bank, lehman, moment
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2016-54-06
Thursday, 06 Oct 2016 09:54 AM
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