According to sources familiar with the matter, German regulators are finally beginning to take a closer look at embattled banking giant Deutsche Bank AG (NYSE:DB) and its prospects for survival.
During a recent meeting out of public view, top finance officials reportedly discussed DB’s massive headwinds, which include steep banking losses, potential fines, and capitalization issues. From Reuters:
At a closed session of Social Democratic finance lawmakers this week, Deutsche Bank’s woes came up alongside a debate over Basel financial rules, according to two people familiar with the matter. Participants discussed the U.S. fine and the financial reserves at Deutsche Bank’s disposal if it had to cover the full amount, according to the people, who asked not to be identified because the meeting on Tuesday was private.
Regulators were unable to come up with any solutions or specific actions in the meeting, however:
While the participants — members of the junior party in Chancellor Angela Merkel’s government — didn’t reach any conclusions on the likely outcome, the discussion signals that the risks have the attention of Germany’s political establishment. The German Finance Ministry last week called on the U.S. to ensure a “fair outcome” for Deutsche Bank, citing cases against other banks where the government settled for reduced fines.
DB shares recently hit record lows on the news of a massive fine from U.S. regulators, but as they say, a rising tide lifts all ships. Following yesterday’s dovish Fed announcement, Deutsche Bank stock is up nearly 5%.
This bounce could well be short-lived, however, as DB is looking more and more like a company that will need significant help to stay afloat.