Delamaide: ‘Deutsche Bank moment’ still a risk
Darrell Delamaide
WASHINGTON — Reports last month that the U.S. Justice Department had floated the idea of a $14 billion fine for Germany’s largest bank sent world stock markets into a tizzy…. The Wall Street Journal editorial writers were quick to characterize the fine as a “robbery” that was politically motivated to make an impact before the U.S. presidential election, even if it caused a financial panic…. German officials have turned a blind eye to Deutsche’s missteps, even as they were quick to scold other European Union nations about the fragility of their banks.  Banking expert Karen Petrou called these officials out in a memorandum last week, as she took issue with The Wall Street Journal’s blaming the Justice Department fine for the incipient stock market panic. “It might better have blamed the problem on German officials who sidetracked Eurozone efforts to craft an effective, practical resolution regime in their efforts to make it not just one that ensured resolution, but also revenge,” Petrou wrote. In addition, she continued, it was Germany that opposed tough stress tests and other regulatory standards that have worked well in the U.S. “Had Germany not been so tough on the rest of the Eurozone and so indulgent towards its largest bank,” Petrou concluded, “Deutsche Bank would not now be bringing the global financial system back to the brink.”… Petrou argues that the real risk the German bank faces involves not liquidity or capital but prestige. “Deutsche Bank’s problems are reputational — not the traditional solvency and liquidity ones at which the post-crisis rules are aimed,” she wrote in last week’s memo. “In banking, reputation counts more than dollars and Euros as a bulwark against run-risk.”