Deutsche Bank Shares Drop As Bond Insurance Rate Rises

Shares in Deutsche Bank fell sharply Friday, dragging down other major European banks and leading German Chancellor Olaf Scholz to express confidence in the country’s largest lender after fears about the global financial system sent fresh shudders through the market, David McHugh reported for the Associated Press (AP).

Photo Insert: Asked whether Deutsche Bank could be the next Credit Suisse, Scholz said “there is no reason to worry. Deutsche Bank has thoroughly modernized and reorganized its business and is a very profitable bank.”

Deutsche Bank shares closed down 8.5% on the German stock exchange after falling as much as 14%.

That followed a steep rise in the cost to insure bondholders against the bank defaulting on its debts, known as credit default swaps. Rising costs on insuring debt were also a prelude to Swiss lender Credit Suisse’s government-backed rescue by rival UBS.

That hastily arranged takeover Sunday aimed to stem the upheaval in the global financial system after the collapse of two US banks and jitters about Credit Suisse’s long-running troubles led its shares to tank and customers to pull out their money.

Asked whether Deutsche Bank could be the next Credit Suisse, Scholz said “there is no reason to worry. Deutsche Bank has thoroughly modernized and reorganized its business and is a very profitable bank.”

Like Credit Suisse, Deutsche Bank is one of 30 globally significant financial institutions, with international rules requiring it to hold higher levels of capital reserves because its failure could cause widespread losses, Geir Moulson also reported for AP.

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