Remember TARP, and Dodd-Frank, and panic over derivatives, and all the talk of too big to fail; it was just talk.
Deutsche bank of Germany, a darling of globalists, is levered to the hilt, has trillions of dollars in derivatives exposure on their balance sheet, and has a massive capital adequacy gap of some $21B. The German think tank Zew says European banks, led by Deutsche, have inadequate capital to cover losses when the next financial crisis hits; and it is coming.
With zero interest rate policies in place globally, the safety net for banks – the spread between overnight central bank rates and lending rates – is so narrow the banks can’t earn sufficient income between borrowing and lending. With Credit Default Swaps still in existence and the danger they represent for companies like Deutsche, a credit event will start the chaos ball rolling.
When credit relationships between banks and other financial intermediaries begin to be reassessed, that is when the real trouble starts. Good risk managers will have to look daily at their credit relationships with Deutsche, if one ‘panics’ the ball will get rolling quickly for all others. Remember, it isn't panic if you are the first to get out.
I'm busy working on my blog posts. Watch this space!