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The downfall of an institution

Henrik Böhme / jtm July 4, 2016

The once-proud Deutsche Bank is now threatening the global financial system. Things keep getting worse and worse, though Brexit offers a tiny glimmer of hope, writes DW's Henrik Böhme.

Deutschland Deutsche Bank Schriftzug Symbolbild Verluste
Image: Reuters/K. Pfaffenbach

Deutsche Bank is back on top, though on the wrong peak. According to a recent IMF report, it poses a bigger threat to the global financial system than any other bank in the world. For anyone who takes a look at its list of woes, its no wonder why: reconstruction as far as the eye can see, share prices on the floor, and a stock market value of only $19 billion (17 billion euros) - meaning it has dropped from Bloomberg's top-100 bank index.

Yet - and this is what makes it such a great worry for world finance - Deutsche Bank still has around $1.9 trillion of investments on the books. That amounts to more than half of Germany's entire GDP. Nobody wants to picture what would happen if the bank collapsed. Or who it would drag down with it.

Nobody knows what's to come

It has been nearly a year since John Cryan assumed the leadership of Germany's still-largest bank. He took the reins from Anshu Jain, who was chosen to realize his own predecessor Josef Ackermann's dream of 25 percent returns. Jain did what he was expected to do. And the bank is still dealing with the consequences.

7,800 lawsuits have been carried out against the bank worldwide. Most of them are pretty manageable, some were settled for billions upon billions. But a few still carry a destructive power that would cost the bank its existence - money laundering accusations in Russia, for example, or investigations by the US Securities and Exchange Commission (SEC) over peculiar dealings with mortgage-backed securities.

Boehme Henrik Kommentarbild App
DW senior business editor Henrik Böhme

Cryan is making a tremendous effort, portraying himself at times as the man behind the wrecking-ball, at others as the chief builder. He has almost completely replaced the bank's leadership. With an iron broom, he has swept away many of his inherited messes, accepting record losses of over $6 billion in the process.

But his efforts have yet to yield any success. Deutsche's share price has halved itself once again this year. Employee moral is in the cellar. Even the technology is breaking down - in June, double-bookings were recorded on three million accounts, ATMs stopped giving out cash, card purchases weren't going through. Meanwhile the bank keeps talking away about an "image problem."

Glimmer of hope?

So it's clear that things continue to get worse. Cryan stresses over and over that he doesn't see the bank as a takeover candidate. Certainly oversight authorities would take a very close, very skeptical look at such a deal. But even if a competitor from the US or China were able to afford Deutsche Bank out of pocket, they likely wouldn't want anything to do with it in its current condition. As of now, that's the only real insurance against an acquisition.

And still there is a tiny glimmer of hope. If the UK actually goes though with its Brexit, then Europe will be on the hunt for a new financial center. And Frankfurt, already considered the continent's money capital, will definitely be given a good look. With a strong presence in both London and Frankfurt, Deutsche Bank could stand to profit. But until then, it will need three things: money, patience and luck.

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