Originally Posted by
Mush
Their business model is fundamentally flawed. However they are still solvent and have over $200B in liquidity reserves if needed.
To me, the main Issues are:
- Contagion risk
- More clients pulling excess capital (essentially a bank run)
- Inability to pay coupons on their CoCo bonds, or even triggering the bonds themselves.
- Need to raise more capital to meet capital requirements? Becoming more expensive to do that through equity raising.
- DOJ settlement is a lot more than the market is expecting
- A bail out/bail in decision becomes political, election next year in Germany so Merkel is not willing to make tough decisions, could be disastrous in the event of DB needing help (ECB, Germany, WB)