Germany’s biggest companies could band together to save struggling financial powerhouse Deutsche Bank from slipping further into crisis. It’s an option that could rule out the need for a public bailout. EurActiv’s partner La Tribune reports.
Members of the Dax 30, consisting of Germany’s biggest companies trading on the Frankfurt Stock Exchange, could, if necessary, contribute to a capital increase, according to German newspaper Handelsblatt.
“Some of the firms” have discussed the possibility of participating in a rescue operation, but the newspaper drew short of naming specific companies. Deutsche Bank’s importance in investment is considered to be huge to Germany’s main players though.
The Frankfurt bank could also potentially rely on its majority shareholder, the Qatari royal family, which owns more than 11% of Deutsche Bank, to bail it out, according to reporting by Reuters. Both options would mean a bailout using public money could be rendered unnecessary.
According to Bloomberg, Deutsche Bank needs an additional €5 billion in capital if the US Justice Department’s fine does not decrease and the German bank is unable to negotiate some sort of deal.
Deutsche Bank is in crisis mode and its collapse could signal the beginning of a whole new set of economic woes for Germany, the EU and even the entire global financial system, expert Michael Schröder told EurActiv Germany. But he insists that state aid is not the answer.
The Financial Times suggested last week that the embattled banking house could launch an initial public offering on its assets management division, in order to boost capital. Deutsche Bank would not be able to spin it off completely, only in part. Even if the bank got the estimated €2.5 billion that Deutsche AM is worth, it would still need to find over €2 billion from somewhere else.
At the same time, the German government seems intent on not hitting Deutsche Bank with an excessive fine. Reuters reported last week that Berlin is negotiating directly with Washington on the subject and that its national financial supervisor (BaFin) has dropped its investigation into €10 billion of trading with Russia, which had come under close scrutiny.
Fears that Deutsche Bank will have to raise capital, in order to pay its US Justice Department fine for misselling subprime mortgages, have seen it suffer badly. Angela Merkel has ruled out state aid. EurActiv’s partner Milano Finanza reports.
Berlin’s priorities seem to lie with “indirectly” rescuing Deutsche Bank with public support, rather than public money. But the real question remains whether any form of bailout, regardless of its provenance, will be dependent on reform to the bank’s structure or management. If a rescue operation is carried out without conditions, then it could just be a matter of throwing good money after bad.