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.