The Elephant In The Room: Deutsche Bank's $75 Trillion In Derivatives Is 20 Times Greater Than German GDP

Tyler Durden's picture

It is perhaps supremely ironic that the last time we did an in depth analysis of Deutsche Bank's financial situation was precisely a year ago, when the largest bank in Europe (and according to some, the world), stunned its investors with a 10% equity dilution. Why the capital raise if everything was as peachy as the ECB promised it had been? It turned out, nothing was peachy, and in fact DB would proceed to undergo a massive balance sheet deleveraging campaign over the next year, in which it would quietly dispose of all the ugly stuff on its balance sheet during the relentless Fed and BOJ-inspired "dash for trash" rally in a way not to spook investors about everything else that may be beneath the Deutsche covers.

We note this because moments ago, Deutsche Bank did the same again when it announced that it would issue yet another €1.5 billion in Tier 1 capital.

The issuance will be the third step in a co-ordinated series of measures, announced on 29 April 2013, to further strengthen the Bank’s capital structure and follows a EUR 3 billion equity capital raise in April 2013 and the issuance of USD 1.5 billion CRD4 compliant Tier 2 securities in May 2013. Today’s announced transaction is the first step towards reaching the overall targeted volume of approximately EUR 5 billion of CRD4 compliant Additional Tier 1 capital which the Bank plans to issue by the end of 2015

Ok, so in retrospect nothing is peachy in Frankfurt, and for all the constant lies about improving NPLs and rising cash flows, banks - especially those which not even the ECB can bailout when push comes to shove - Deutsche is as bad as it was a year ago.

So, just like last year when we decided to take a look inside the company's financials to understand why DB was scrambling to dilute its shareholders and raise a few paltry billion in cash, so this year too, we had the pleasure of perusing the European megabank's annual report.

What we found, while hardly surprising for those who read out post from also a year ago, "At $72.8 Trillion, Presenting The Bank With The Biggest Derivative Exposure In The World (Hint: Not JPMorgan)", is just as jarring.

Because while America's largest bank by assets, and certainly ego of its CEO, that would be JPMorgan of course, had a whopping $70.4 trillion in total notional of derivative holdings (across futures, options, forwards, swaps, CDS, FX, and so on), Deutsche Bank once again put it well in the dust.

The number in question? €54,652,083,000,000 which, converted into USD at the current exchange rate, amounts to $75,718,274,913,180. Which is over $5 trillion more than JPM's total derivative holdings.

As we explained last year, the good news for Deutsche Bank's accountants and shareholders, and for Germany's spinmasters, is that through the magic of netting, this number collapses to €504.6 billion in positive market value exposure (assets), and €483.4 billion in negative market value exposure (liabilities), both of which are the single largest asset and liability line item in the firm's €1.6 trillion balance sheet mind you (and down from €2 trillion a year ago: a 20% deleveraging which according to DB "was predominantly driven by interest-rate derivatives and shifts in U.S. dollar, euro and  pound sterling yield curves during the year, foreign exchange rate movements as well as trade restructuring to  reduce mark-to-market, improved netting and increased clearing"), and subsequently collapses even further into a "tidy little package" number of just €21.2 in titak derivative "assets."

And as we further explained both last year and every other time we have the displeasure of having to explain the reality of gross vs net, this accounting gimmick works in theory, however in practice the theory falls apart the second there is discontinuity in the collateral chain as we have shown repeatedly in the past (and certainly when shadow funding conduits freeze up), and not only does the €21.2 billion number promptly cease to represent anything real, but the netted derivative exposure even promptlier become the gross number, somewhere north of $75 trillion.

The conclusion of this story has not changed one bit from last year: this epic derivative exposure is the primary reason why Germany, theatrically kicking and screaming for the past five years, has done everything in its power, even "yielding" to the ECB, to make sure there is no domino-like collapse of European banks, which would most certainly precipitate just the kind of collateral chain breakage and net-to-gross conversion that is what causes Anshu Jain, and every other bank CEO, to wake up drenched in sweat every night.

Finally, just to keep it all in perspective, below is a chart showing the GDP of both Germany and Europe compared to Deutsche Bank's total derivative exposure. If nothing else, it should make clear, once and for all, just who is truly calling the Mutually Assured Destruction shots in Europe.

As always, there is nothing to worry about: this €55 trillion in derivative exposure, should everything go really, really bad is backed by the more than equitable €522 billion in deposits, or just over 100 times less.

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Grande Tetons's picture

Pffft. Call me when Moochelle's ass is in the room. 

DoChenRollingBearing's picture

Those two notional values of JPM's and Deutsche's derivatives are EACH about the same as world GDP, no?  Even notional values that high likely count (and so are bad) as who knows if many cancel out the others...

SoberOne's picture

In fiat funny money, it's not that much. Just buy a bunch of boxes of monopoly!

Say What Again's picture

Starting at around 3:09 EST someone began juicing the market -- Maybe its DB.  Many of the internal metrics, like TICK, UP/DOWN vol, VIX Ratio, etc, all went 3 sigma in a matter of a 120 seconds or so.

Say What Again's picture

Maybe DB is trying to front-run the Tuesday Ramp-a-Thon.

CClarity's picture

BofA not so pretty today.  

All dem bankers know this is CB fluff and that they're a mess underneath.

eatthebanksters's picture

Isn't hypothecation just a formal word for Ponzi?

strannick's picture

Thats alot of elephant. Hopefully 75 trillion nets out perfectly, all their counter parties are fully collateralized, and the rehypothecated assets are fully backed. At least they'll have their gold back in 50 years, at this rate.

bania's picture

Germans sure love their scheisse videos!

rubiconsolutions's picture

Call me when Staples announces that they are running out of ink cartridges.  /s

I am more equal than others's picture




Much like the big dick fallacy, these guys believe in the big risk (big reward) fallacy. 

Save_America1st's picture

Ummmmm....The Golden Jackass has been talking about Deutsche Bank crumbling since last summer. Their top level execs been under heavy Interpol investigative pressure and they've had to withdraw from the London gold fixing scheme.  Jim says D.B. nightly has to scramble all night long to ensure they don't totally implode and can survive another day.  He predicts they will be broken up and

Jim Willie: If Deutsche Bank Goes Under It Will be Lehman Times Five!

44 minute youtube interview with The Doc about it from July 2013:

He predicts D.B. will be broken up in to 5 smaller parts:

Jim Willie Reveals the SMOKING GUN On US Gold Rehypothecation!

49 minute youtube interview with The Doc from Feb. 2014:




Keyser's picture

For some reason the song Puff the Magic Dragon comes to mind because the Germans must be smoking dope to think this is going to end well... 

Wolferl's picture

The Germans? DB is just German by name, it´s a city of London investment bank. And do you really think Germany will pay for them alone if they go bust?

BaBaBouy's picture

We Live In This FANTASY LAND Where You Can Short Unlimited Amounts Of GOLD (And Limit Its Price)...
Does Anyone Really Dream That It Can Last ???

Up The Ante To $175 Trill, $250 Trill, And Why Not $1000 Trill ???

Herd Redirection Committee's picture

City of London, Frankfurt, Rothschild, what difference does it make?

JR's picture

With this kind of leverage, Germany is nothing in comparison. DB uses Germany for leverage – and as long as the politicians give the cabal what it wants they will let them operate. But the time may come when it needs to take delivery of the country.

In the days in the long ago, banking was a service industry…keeping depositors money for a rental fee or charging a fee for their retail product, the bank loan.

Then, central banking arrived like a thief in the night.

Property, money, civil rights and the rest were swept into cabal pockets like marbles to a sack.

And now we find the giant banks taking one more handful: an entire nation and all its parts.

Just what kind of leverage would DB have over Germany? With an event concerning former Deutsch Bank’s Chief Josef Ackermann not so long ago, it can be shown that pressure looks like this - in Ackermann’s bid for Greek austerity measures complementing a $17 billion Greek bailout of the TBTFs:

Deutsche Bank’s Chief Josef Ackermann argued against restructuring the Greek debt because “it would force investors — and banks — to share Greece’s pain.

According to the NY Times: Ackermann "called on European governments to devise a ‘Marshall Plan’ for Greece that would offer more aid, while forcing the country to sell billions of euros’ worth of state assets, and provide a framework for rebuilding its economy.

“Any restructuring, Mr. Ackermann cautions, could be even worse than the crisis brought on by Lehman’s collapse. It could threaten the stability of major financial institutions, as well as the European Central Bank, which hold huge amounts of Greek debt, he says.”

Wrote the Times in mid-2011: 

European governments have largely followed that advice. At the same time, however, Mr. Ackermann has opposed the German government and sided with his friend Mr. arguing against restructuring the Greek debt…

Ackermann, whose office in Frankfurt is just a few blocks from close associate Jean-Claude Trichet at the ECB, claims the biggest challenge now is to ‘convince people of any country to help Greece even more.’”

blindfaith's picture

No... the real elephant in the room is these bastards have leveraged themselves with the Federal Reserve at their backs.  Where are Americans outrage?  These guys walk up to the AMERICAN banking window of the Federal Reserve and get all the free money they want ....JUST because THEY HAVE A BANK BANK BRANCH IN AMERICA!!!!!!

Did everyone forget that THIS BANK got millions free and lent it to blackrock or some black something hedge fund to buy all the houses people got cheated out of by the same Federal Reserve.  Hello!!!!

You American's on the hook here not the Germans,  The Germans laugh....hahahaha

The Counrty continues to be sold to anyone, and Americans just want games and Tv and burgers, and toys.

BurningFuld's picture

Greece is fixed?




JR's picture

Precisely. Ultimately, it is more US taxpayer funding for the American Empire, aka global governance. The trouble is, Americans do not own this Empire. It is banker-owned.

It ‘s 100 years past time for the American people to show some backbone and stop funding with America’s treasury, assets, labor and resources, aka their standard of living, the private oligarchs who own the Fed.

Our daily dose of bad news concerning our freedoms, our culture and our property produces unconstituional court verdicts, political corruption, military threats, and malfeasance and tyranny, small and large.

But where is the center of this storm: who pulls the levers that creates these ill winds? Where does the buck stop…and it’s not where Harry Truman and Barack Obama sit!

It’s in the office of a private organization called the Federal Reserve. And when this beast breathes no more, the Good Ship America will be on her way again.

Great post! Thanks.

TheReplacement's picture

When all you have is nothing, all in isn't always a bad risk.  When you already have everything, all in is practically a sin.

mt paul's picture

as per the title 


long peanutz

nope-1004's picture

Not if the elephant in the room is in a coma, brain dead with no one allowed in the room to verify.


mt paul's picture


elephant ...

TruthInSunshine's picture

The trigger for the last meltdown (2008-2009) was liquidity starvation which led to a credit crunch (banks/financials and other holders of chattel paper assets were caught swimming naked with poison well assets and deteriorating balance sheets & couldn't re-collateralize).

The catalyst for the arriving crisis will be the real rate of inflation (already massively, adversely impacting the average barely shopper) on things such as necessities (gas, groceries, utilities, property taxes, higher income tax rates, higher medical care costs, etc.) coupled with the dawning realization on the part of corporations and "investors" that'central bank monetary policy since 2008 has now created the largest divergence between the perceived and real fundamental prices (the ask, which affects the bid for whatever actual demand there may be) on assets (i.e. price distortion - this extends to everything from real estate to stocks to bonds, including sovereign bonds).

Finally, there is a dramatic structural change taking place in the real economy at light speed, where automation is eviscerating the need for human workers (at ra time when the demand for labor is already quite weak) whereby the former middle classes in developed nation economies & working classes in emerging market economies are suffering wage deflation & loss of employable positions.

One example of these trends playing out using the U.S.'Economy as an example right now is that subprime is back in terms of real estate, auto and durable'good purchases, because the banks, manufacturers & retailers literally couldn't
survive if they were forced to rely upon/sell their wares to people who actually had the resources needed to purchase or finance the purchase of these things by historically normal standards.

3% to 5% down home mortgages and 84 month liar auto loans are back, and soon, the NINJA loans will be, too.

Seer's picture

And consider that banks really don't too well if everyone is "paying off" loans:

Debt Paydown Projected by U.S. to Be Biggest in Seven Years

If this isn't signaling the death knell for fractional reserve banking I don't know what is.  And they make is sound like all is well...

Volkodav's picture

Seer....let's just call it more what it really is....Fictional Reserve Banking

everyone quiet and let that sink in

El Vaquero's picture

Or we simply call it a legalized Ponzi scheme.

logicalman's picture

Fractional reserve banking, fiat currency, interest and inflation.


JR's picture

There are several elephants in the room and it’s getting mighty crowded – hence, the tipping point. Here’s just one of those big elephants pointed out by Paul Craig Roberts – the offshoring of America’s manufacturing jobs with most all the profits going to the America’s newly affluent rulers, the international oligarchs whose core of operations is the Fed.

Roberts (2014)

After offshoring… “US manufacturing centers became shells of their former selves… Detroit lost 25% of its population, Gary Indiana lost 22% of its population, Flint Michigan lost 18% of its population, Cleveland lost 17% of its population, and St Louis lost 20% of its population…

“What jobs are the displaced manufacturing workers to be trained for? Why, service jobs, of course…service sector jobs such as hotel maids, hospital orderlies, retail clerks, waitresses and bartenders are low productivity, low value-added jobs that cannot pay incomes comparable to manufacturing jobs. The long term decline in real median family income relates to the movement offshore of manufacturing jobs and tradable professional service jobs, such as software engineering, IT, research and design.

“Moreover, domestic service jobs do not produce exportable goods and services…

“A country whose best known products are fraudulent and toxic financial instruments and GMO foods that no one wants cannot pay for its imports except by signing over its existing assets…

 “Economic development has always been about acquiring the capital, technology, business knowledge, and trained workforce to make valuable things that can be sold at home and abroad. US capital and technology are being located abroad, and the trained domestic workforce is disappearing from disuse and abandonment. The US is falling out of the ranks of the industrialized countries and is on the path to becoming an undeveloped economy.”

logicalman's picture

How can a government sell what belongs to the people to cover their own irresponsible actions.

In international law, odious debt, also known as illegitimate debt, is a legal theory that holds that the national debt incurred by a regime for purposes that do not serve the best interests of the nation, should not be enforceable. Such debts are, thus, considered by this doctrine to be personal debts of the regime that incurred them and not debts of the state. In some respects, the concept is analogous to the invalidity of contracts signed under coercion.

JR's picture

Yes! Really good!! And ultimately all that backs these Fed oligarchs is paper...simply paper.

newworldorder's picture

What is known to the Banksters and the 1% is largely not understood by the average person/citizen in most countries on the planet.

Since it is not known and faith in Government/Democracy still exists in the West, the system will limp along. Most people in the West have lost the simplicy of understanding of that which affects their daily lives. The connection of real work to saving, to wealth creation is now in the hands of the bankster money creators, with the FED as the ultimate backstop.

It is that simple. If and when the implosion comes, it will be the biggest suprise in peoples eyes. This is what keeps the FED, Central Bankers and World Governments on perpetual edge. Were it to happen, they know they could not control man's animal spirits.


Strat-O-Sphere's picture

Spot on JR. The real economy has been financialised, and manufacturing has been either dismantled or offshored to Asia. It seems that most "developped" western countries are doomed to become undevelopped at this rate. The worst thing is that this condition is completely self inflicted. Thanks so much western oligarchs, banksters and your puppet politicians whom some of us foolishly elect. 

blindfaith's picture

Hey Sunshine....


YOU are one of the LAST surviving credible guys to read, the rest have left the room.  To many hijackers now on Zero, spammers, and guys who have nothing to do but post spam.  I hardly read any replys now, glad I caught yours.

logicalman's picture

As long as you have decent filters, ZH is worth a look, IMHO.

You just have to separate the wheat from the chaff.


G-R-U-N-T's picture

You can thank Robert Rubin influence on Slick Willie for repealing the Glass-Steagall Act, they're brilliant!

TruthInSunshine's picture

The Gramm–Leach–Bliley Act (GLB), also known as the Financial Services Modernization Act of 1999, has been as destructive to the U.S. Economy as any single piece of legislation in a long, long time.

It has done more to break pricing of commodities (and ultimately, many asset classes, as commodity input prices go a long way to determining the price of many asset classes) based on true supply/demand as any single piece of legislation in history, has allowed for the further financialization & manipulation of pricing of everything from oil to corn, from live hogs to lumber, from metals to sheaf, and everything in between, and has led to extremely high volatility of prices as well as sustained high levels of real inflation of commodities, all things that it was allegedly & ironically (and disingenuously) pitched to prevent when being drafted and voted upon by the bought & paid for CONgress & signed into law by the equally bought & paid for TOTUS.

Unknown Poster's picture

As long as everyone is still standing they roughly cancel. But a big swing in rates or FX positions could put that in doubt.

nuclearsquid's picture

Can someone who knows something about derivatives please explain to me why GROSS derivative exposure is supposed to be frightening?  Is it really only concern about interconnected-ness, counterparty risk, and system complexity?  Or is there some way to quantify the increased volitility it projects onto NET derivative exposure?

Winston Churchill's picture

Put it this way.
Lehman Bros. only had a net $8bn in derivative exposure.
It turned out to be $795bn.
Nobody has the first clue what the true situation is, including the banks.

El Vaquero's picture

Because all of the calculations of net risk assume that not one of the counterparties goes tits-up, like with Lehman and what AIG would have done without a bailout.  That, and if you look at the US situation, JPM, BofA, and Citi have crammed well over $100 trillion in derivatives into their deposit taking FDIC insured subsidiaries. 

resurger's picture

Remember when Kuruda said that he was ready to buy Derivatives and put them on the BOJ Balance sheet!




nuclearsquid's picture

sorry TD.  glanced over the link.  Keeping up with the Hedge while at work can be taxing.

keep up the good work.


logicalman's picture

Worth going back and reading carefully.