DECEMBER 2019 / NO. 1

Will Deutsche Bank be the first Domino to fall?

“If Deutsche Bank goes down, it will be even more catastrophic for the global financial system that the collapse of Lehman Brothers in 2008”
“Germany is the ‘sick’ banker of the EU. From the 6.000 banks in the EU, 1.600 are in Germany. November 21 2019 Moody’s decreased the rating from ‘stable’ to ‘negative’”
In previous INTELs we described the financial situation of Germany’s Deutsche Bank as dramatic: losses of 6-8 billion euros in 2019, 18.000 layoffs in the 3rd quarter 2019 and they even cancelled the Christmas 2019 reception for retired employees. Deutsche Bank is dying and insiders see it as a ‘zombie bank’ that is stumbling along until someone finally puts it out of its misery. Deutsche Bank is the largest domino in Europe’s very shaky financial system. When it collapses, it will set off a chain reaction that nobody is going to be able to stop. It might even disintegrate the EU.

German ‘Landesbanken’ and ‘Sparkassen’ (Saving Banks) could make the disaster even bigger

The ambition to restructure and to integrate the Landesbanken and Sparkassen in Germany completely failed since 2008. From every euro earned, these banks spend 80 cents on costs. Of all savings from the Germany people these banks earn nothing because of the negative interest rates at the ECB, European Cental Bank. Because of this, German bankers and politicians blame the ECB for the low profits of these 1.600 banks. However, the German banking sector didn’t reform since 2008, because regional governments are the owners, regional bankers and local politicians just don’t want to give up their well-paid positions and prefer the status quo. These banks are also not profit-driven because of state-ownership. The Sparkassen share the back-office and all of them offer the same products & services, have the same risk management systems, IT-systems and marketing. However, they all prefer to stay independent as 400 independent legal entities. These banks also even have a so-called ‘no competition principle’, meaning that they will not compete with each other!
German bankers and politicians have criticism on the financial situation in Greece, Italy, Spain and Portugal, however, neglect the dramatic situation in Germany itself. A feeling of urgency is missing. The general public feeling in Germany is that the Landesbanken and Sparkassen are fully ‘safe’. If Germany will face another recession you don’t have to ask yourself what might happen. In addition, what is going to happen with Deutsche Bank with tens of trillions of dollars of exposure to derivatives.
The best solution for organizations to handle this is to get these huge threats on their radar screens first. Secondly, to execute Grey Swans Analyses and Gray Rhinos Analyses to identify the impact of it and to create Courses of Action.

Strategic Competitive Intelligence

Since 1985 our firm is active in strategic intelligence for a wide variety of customers around the world. With our two-days International Master Class we train business leaders, professionals and managers to see the timely insights, foresights and potential scenarios to become the eye of the storm in the ever changing competitive landscape. The situation described about the German financial system is just one of the many threats Europe is going to face short term. Does your company have a crow’s nest, watch tower or radar to timely foresee what’s going to happen in your sector of industry?
“It’s good that people of a nation do not understand our banking and monetary system, for if they did, I believe there would be a REVOLUTION before tomorrow morning” , Henry Ford

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