Is Deutsche Bank Too Big To Fail?

Is Deutsche Bank Too Big To Fail?

Is Deutsche Bank Too Big To Fail?

It’s not been a good time for Deutsche Bank lately, going in to 2019 Deutsche Bank could be a major risk to the market.

The bank is a major financial company in Germany and a very powerful one within Europe, what is so dangerous, is they’re holdings of derivatives.

A lot of people don’t understand derivatives, and this is what makes the trading and holdings of them so dangerous to the markets. It is estimated Deutsche Bank has in the region of €50 TRILLION (€50,000,000,000,000) this is about the size of the global economy.

Deutsche Bank shares have dropped a huge amount already; going in to 2018 the shares were trading at around $20 (as time of writing they are trading at $8). The shares haven’t traded above the 50-day moving average since way back in September.

Now do we think the German Government can bail out the bank; is Deutsche Bank too big to fail in the German mindset? Well the bank does have an advantage with a large deposit base compared to other banks being dependent on wholesale funding.

Though a warning; with having the world’s largest derivatives book, and the stock going lower, a potential risk of spooking other financial businesses looks greater, and the lower Deutsche bank share price goes, the greater probability the German government will be asked for an injection of capital.

We don’t think Deutsche Bank will be allowed to fail, it’s quite possible the German Government (with the use of German Taxpayers) won’t allow it to happen, though how much it will cost is any ones guess, however will be a painful one.

That won’t stop us from taking a Short position, we’re going to hold as more downside of the stock is most likely before it gets any better for them.

Deutsche Bank Too Big To Fail

(Our trading and image was done using an account with UK based broker IG)

*Please Note, Forex and other forms of trading carry a high level of risk to your capital as you could lose all of your investment. These products may not be suitable for every investor, therefore ensure you understand the risks and seek independent advice. Invest only what you can afford to lose. We are NOT financial advisers and we do NOT offer financial advice. 


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