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Deutsche Bank Crisis Could Be Worse Than Lehman Collapse

Deutsche Bank Crisis Could Be Worse Than Lehman Collapse

The headquarters of Deutsche Bank stand on Sept. 26 in Frankfurt, Germany. Shares of Deutsche Bank dropped to their lowest level since the 1980s following reports that the German government will not step in to shore up the bank. (Hannelore Foerster/Getty Images)

By    |   Thursday, 29 September 2016 03:50 PM

A Deutsche Bank Crisis could be worse than the Lehman Brothers collapse in 2008 after the bank’s shares hit record lows this week.

The Lehman Brothers collapse was a defining moment in the financial crisis in 2008 after the financial services firm filed for bankruptcy protection, which to this day remains the largest bankruptcy filing in U.S. history, with Lehman holding more than $600 billion in assets, Business Insider noted.

Phoenix Capital Research, an investment research firm located in Washington, D.C., said Deutsche Bank, which is considerably larger than Lehman Brothers, could find itself in a similar situation in the European Union, the Express reported.

“DB is the proverbial ‘canary in the coal mine’ for Europe,” the research firm said, according to the Express. “Perched atop one of the largest derivatives books in Europe, DB has ties to most major financial institutions in the region. Which is why as soon as DB starts nose-diving, you know something big is up.”

The bank’s shares fell by nearly 20 percent over a two-week span that started Friday, Sept. 9, Express noted. The U.S. Justice Department has hit the bank with billions in fines over the past couple of weeks, and the German government has no plans of lending a helping hand, according to CNBC.

The German banking giant experienced its last peak in July of 2015, but has seen its shares fall more than 65 percent since then, CNBC noted. The drop has eliminated more than half of the bank’s market value since its peak, falling from about $50 billion to $16 billion. That has been coupled with a 21 percent decline in net revenue during the first half of the year.

The bank may be able to restructure if it can negotiate its $14 billion settlement with the Justice Department down to the estimated $5 billion figure, CNBC noted.

Last week, Fitch Ratings said it expects the final settlement to be far lower and “much more in line with provisions the bank has already set aside.”

“There are no rating implications at this stage, but if the size of the final settlement turns out to be materially more than the provisions made, this could result in negative rating action,” Fitch analysts said in a news release.

IMF Managing Director Christine Lagarde told CNBC on Wednesday that she doesn’t see the German bank “at a stage where state intervention is absolutely called for at the moment.”

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A Deutsche Bank Crisis could be worse than the Lehman Brothers collapse in 2008 after the bank's shares hit record lows this week.
deutsche bank, crisis, lehman brothers, collapse
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2016-50-29
Thursday, 29 September 2016 03:50 PM
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