IMF Says Deutsche Bank Needs to Convince Investors its Business Model is Viable

Deutsche Bank needs to convince investors that its business model is viable in an extremely low-rate environment, a senior International Monetary Fund official said on Wednesday amid market concerns about the financial strength of Germany’s largest lender.

“Deutsche Bank … is among banks that need to continue to adjust to convince investors that its business model is viable going forward and has addressed the issues of operational risk arising from litigation,” Peter Dattels, the IMF’s monetary and capital markets deputy director, told a news conference.

Deutsche Bank has been engulfed by a crisis of confidence since the U.S. Department of Justice last month demanded up to $14 billion to settle claims that Deutsche missold U.S. mortgage-backed securities before the financial crisis – an amount viewed as a major drain on its capital.

Dattels said that German authorities are closely monitoring Deutsche’s health and that the European financial system remains resilient.

But in a new assessment of global financial stability released on Wednesday, the IMF said European banks need “urgent and comprehensive action” to address legacy non-performing loans and bloated, inefficient business models that threaten to cripple them with too-low profits.

via Reuters

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza