On the day when Deutsche Bank CEO John Cryan is travelling to Washington, the daily Die Welt delivered a message from the German establishment, in an article headlined “Deutsche Bank Threatens U.S. Government with Systemic Collapse.”
It is a chicken game, Die Welt writes, explaining what this means from the famous James Dean movie “Rebel Without a Cause.” John Cryan plays the role of James Dean, and is going to tell the Americans: if you push too much, Deutsche Bank will go bankrupt and pull you down, too.
Die Welt has two important charts: one showing foreign bank investments in German banks, and another one showing German export of derivatives (sic).
Foreign bank investments in German banks amount to EU1 trillion. Leading the charge are British banks with EU316 billion, number two are French banks with EU259 billion. Then come Luxembourg, the Netherlands, and the U.S.A. with between EU70 and EU130 billion each.
In the list of world export of derivatives, German banks are in the first place, head to head with Britain. Third is Switzerland, and fourth is the U.S.A.
“German banks have twice as many cross-border derivative contracts as U.S. institutes,” says a strategist at Nomura. “The DOJ [Department of Justice] cannot afford to claim a fine that is much too large, if it does not want to risk a new banking crisis in its own country,” Die Welt writes.
“Therefore, Cryan must play the ‘chicken game’ with the U.S. officials so long, until the fine is reduced to $4 billion.” Anything above this will be problematic for DB, writes Die Welt, although reducing the fine will in fact do little to resolve Deutsche Bank’s crisis.
The idea, says Die Welt, is to avoid a fine as high as to absorb the entire planned capital increase. It is a difficult path, because, per shareholder mandate, DB can increase its equities by only 50%, which makes a net capital quota increase of EU5.6 billion on the current capitalization of EU15 billion (in a capital increase, shares are usually devalued by 25%).