Deutsche Bank CEO Warns Of "Fatal Consequences" For Savers

Tyler Durden's picture

Deutsche Bank's war of words with the ECB is not new: it was first unveiled in February when, as we wrote at the time "A Wounded Deutsche Bank Lashed Out At Central Bankers: Stop Easing, You Are Crushing Us." Europe's largest bank, with the massive derivatives book, then upped the ante several months later in June, when its chief economist Folkerts-Landau launched a shocking anti-ECB rant in which it warned of social unrest and another Great Depression.

Ironically, these infamous diatribes hurt more than helped: telegraphing to the market just how hurt DB was as a result of the ECB's monetary policy, the market punished its stock, which has been recently trading within spitting distance of all time lows, in effect making Deutsche Bank's life even harder as it now has to contend not only with its own internal profitability problems, but also has to maintain a market-facing facade that all is well. So far, it has not worked out very well, prompting numerous comparisons to another infamous bank.

 

So, in what may have been DB's loudest cry for help against the ECB's unwavering commitment to rock-bottom interest rates, the bank's CEO, John Cryan, warned in a guest commentary ahead of the Handelsblatt Banking Summit titled, appropriately enough "Banks in Upheaval", to be held in Frankfurt on August 31 and September 1, that “monetary policy is now running counter to the aims of strengthening the economy and making the European banking system safer."

However, his most striking warning was not aimed at Mario Draghi, but at Germany itself - and ostensibly his own clients - implicitly suggesting that if Deutsche Bank goes down it is taking everyone down with it, when, as cited by Bloomberg, he warned of “fatal consequences" for savers and pension plans while “companies refrain from investments due to ongoing uncertainty and demand less loans.”

The details are known to those who have followed the paradox of central bank failure - if only for the economy and ordinary people -  summarized earlier today by Citi's Matt King.

Quoted by Handelsblatt, Cryan warned that "the ECB’s policy is squeezing the margins of Europe’s struggling banks, making it harder for insurers to find profitable investments and dangerously distorting financial market prices." Meanwhile, he added, the hoped-for benefits haven’t materialized. “Given the continued uncertainty, companies are holding back on investments and are hardly seeking any credit anymore,” he wrote.

He added that it was unacceptable that financial regulators demanded that banks increase their safety cushions but then imposed punitive interest rates on these additional reserves.

Many agree with Cryan:"The hoped for pan-European investment boost hasn’t happened, and neither have the expected structural reforms in the affected euro member states,” said Georg Fahrenschon, president of the German Savings Bank Association. Instead, uncertainty is growing throughout the euro zone in light of the “horrendous sums of money the ECB is now directly pumping into the markets,” he added.

While Cryan admits that the ECB's intervention did avoid an all out collapse in Europe it has done so at extreme costs, like negative rates on most German debt. Which is why, Cryan writes it is high time for a change in direction at the ECB. He would say that: his bank is in the midst of a painful restructuring and battling to keep the confidence of investors, so the side effects of the ECB’s policy are causing it particular pain. That’s one reason why Mr. Cryan is particularly critical of the negative interest rate on bank deposits at the ECB. He said net interest income, traditionally the most important pillar of bank earnings in the euro zone, had fallen by 7 percent since 2009.

Martin Lück, strategist at Blackrock, the world’s largest asset manager, agrees with Cryan and fears that the ECB's actions are having the opposite effect of the spending spree intended. With interest rates falling, people have to save more rather than less to secure their pensions. And the punitive banks are weakening banks and forcing them to curb their lending, he said. Insurers and pension funds were also being hit because they had to enter ever higher risks to secure returns on their investments. This has become evident with the slide in yields into negative territory on many sovereign bonds including 10-year German government paper. These securities are the backbone of the insurers’ investments.

Private investors face the same problem. If they don’t want to take higher risks, for example by investing in stocks, “then they must save substantially more than before to secure their pension,” said Frank Engels, head of fixed income fund management at Union Investment.

Meanwhile, the beneficiaries of the ECB's asset reflation policy are few: only around nine million Germans own stocks, just over 10 percent of the population. The risk is now that savings will lie dormant in bank accounts without earning interest. Germany’s central bank, the Bundesbank, has calculated that Germany had a savings ratio of 9.7 percent for 2015, the highest level since 2010, and it’s likely to rise further in 2016. In the first quarter it was up 0.2 percentage points above the year-earlier level.

Worse may come if Cryan's fatalistic warning comes true: after all, few CEOs ever talk of "fatal consequences", especially since the context of these words has become so very clear.

* * *

So what, according to the CEO, is the only lifeline available to European banks, and to savers, in Europe? In his guest comment, Cryan said that an EU banking union was an important step that should be followed by a capital markets union, which become more important in order to provide the much needed funding for companies as banks shrink their balance sheets. In short, a continent-wide backstop system.

The warnings for savers could not be any clearer.

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Winston Churchill's picture

Don't shoot or the schwarze gets it.

knukles's picture

Seriously.  The EU's financial infrastructure quickly weakens with Brexit.
                                God Save the Queen

Billy the Poet's picture

“fatal consequences"

 

That's taking negative rates a little bit too far.

knukles's picture

Stage 4 Financial Pancreatic Cancer

gladih8r's picture

Let me guess, this particular corporate welfare recipient didn't see it coming from a decade away either. Translation of his message:

"The ONLY chance now is to bail out the bank with whatever the general population has in their pockets.  Oh....golly, gee, it's just so tragic that we have no other alternatives, now fork over everyone, I have hookers and blow waiting for me down the hall."

Perimetr's picture

So the need for stockpiling food

and a larger German Army becomes clear . . .

DaveyJones's picture

 don't just stockpile food, learn how to grow and store it. Along those lines, get out of the stupid print and numbers game. Learn real skills and gather real things for the real world coming soon (or making a comeback) to a backyard near you.

espirit's picture

The Sharks smell blood in the water.

Feeding Frenzy!

bamawatson's picture

in charge of who is there in charge of me

weburke's picture

when lehman collapsed, it was ZH that said the next was DB.

Boris Badenov's picture

And Wavy Gravy said, "10 Years After".....

 

waterwitch's picture

Perhaps the recent decline in miners is the result of DB liquidating a large chunk of its holdings?  What will the consequences of DB unwinding its derivatives be? Not good for sure. No bank(s) are large enough to stem that flood.

beemasters's picture

Exactly. Venezuela's six months of forced farming is anytime better than the planned forced military service for the Germans. One is to survive, the other is to get killed.

The central planners's picture

And also learn how to grow your own pokemons.

Okienomics's picture

Hey now, I REFUSE to allow my son to make in-app purcases for more incubaters.  He can just walk more.

aliens is here's picture

Growing food is hard to do when bullets and bombs are flying.

booboo's picture

well the guy does look a bit like colonel Klink, my guess he will run Stalag 13

Offthebeach's picture

Read Werner Klemperer's( uncle of klink) WW2 diaries, Very good account of collapsing Nazi Germany for the average person.

Ward no. 6's picture

out of curiosity i will have to check this out

cognitive dissident's picture

me too. But the diaries are of Victor Klemper, Werner's grandfather (not uncle), compiled in a work called 'I Will Bear Witness.'

And I just KNEW that the great Werner K. had thouroughly researched his character/role on HH, so believable as a stalag babysitter just trying to keep his job while insanity ruled his world. Our "insane world" is a catch phrase that advertisers and marketers use all the time while our leaders assure us that everything is normal if not altogether awesomer than ever! Now, where was I going with this... oh yeah, Hogans's Heroes was awesome and never actually offended anybody except Germans or perhaps big dumb/deaf former stalag Sgts -- many living POWs enjoyed the show too, while Hwood's "5000yr+ persecuted" tribe-member producers/directors were behind it until Crane became a star. And techno-phile (anderer) lol 

Infocat's picture

We need much more than just food! Prepare for the next financial system with Metals! http://www.truthjustice.net/

steelhead23's picture

"The ONLY chance now is to bail out the bank with whatever the general population has in their pockets.  Oh....golly, gee, it's just so tragic that we have no other alternatives, now fork over everyone, I have hookers and blow waiting for me down the hall."

There is an alternative.  Were I a DB depositer I would transfer my money elsewhere - today.

As regards the situation, were the ECB to do as Herr Cryan suggests (raise interest rates), asset values would plummet and DB could find itself in Lehman's shoes.  I have concluded that global CBs are trapped.  Low interest rates are killing pension funds and insurance companies and hurting banks (net interest income is abysmal).  But if they were to raise rates, suddenly the collateral on which the house of cards rides would fall in value, triggering margin calls, and potentially massive derivative failures.  I happen to believe that's what they should do, then do the hard work of picking up the pieces so the depression could end and recovery begin - but that scenario has the CBs scared.  I have no other explanation for why the CBs have held rates so low so long.


mkkby's picture

You must have slept thru 2008.  No margin calls for TBTF companies, with mark to market suspended.  Those assets will be valued at what they *model* (ie wish).  Of course, for everyone else it's margin calls and foreclosure.

This CEO is actually saying the right thing.  PUBLICLY AT LEAST.  He said stop the printing and raise rates...  exactly what ZH and intelligent readers have been saying for years.

Ironically it was the germans who argued against bailing out Greece and the other small countries.  Germany didn't want to be stuck with the bar tab for everyone in europe.  Now the tables are turned.  I can't wait to see everyone telling germany to suck it.

walküre's picture

BUT Germany ended up paying and taking on millions of people from within EU and most importantly outside.

Germany always pays, one way or another. This time the Chinese will own Germany and make it a colony for the production of luxury items at Chinese wages.

Infocat's picture

Deutsche Bank and the rest of the criminals are trying to endlessly suck our life out of us! http://www.truthjustice.net/

nightwish's picture

DB CEO faces the exact same 'fatal consequences' you and i face - eventual death. 

Death is a natural consequence of life, no? 

and remember,

On a long enough timeline,, the survivial rate for everyone drops to zero ;-), including this DB ceo scaremongering prick

shamus001's picture

SAVERS are about to LOSE EVERYTHING- and since they so wisely limited withdrawles to head you off at the pass, THIS IS WHAT YOU DO!

* Take your "digital" money and transact with a Krugergrand vendor, buying up all the gold bullion (or silver) you can get your hands on.  Then stash that at home in a safe, and protect it with your silly 'pellet' guns (because you let them strip awy your rights to defend your families) THEN
ATLEAST you will be able to liquidate what you need a little at a time for goods and services, and when your Euro or your CB collapses (as ours in America will eventually) you will have ALL of your wealth safe and holding good value. (great value when considering there will be NO CURRENCY)- this will cause deflation of every asset but your hard money (bullion) which will buy up ALL THE CRASHED ASSETS that will be on FIRE SALE! 

This is how you get rich!  This is the EU plans.  They control the states banks, and are actively trying to collapse them while stripping YOUR wealth away, so in the end, they are the only ones with any access to $.  They will soak up all the realestate from ALL of the distressed nations in Europe, and be your LANDLORDS for at least 100 or more years! 

THEY ARE BUYING GOLD- YOU SHOULD TOO!  (why do you think they're trapping your money inside the banks?  so when those sattelite banks fail, they strip the people of 200 years of wealth, while holding all the cards themselves!) 

So think Rothchild scum- French/Britian war- Britian stock market collapse due to Rothchild lie about outcome of said war, and scooped up all the property during a firesale market crash.  This is just BIGGER than UK, but same playing style by the same banking crooks!

Handful of Dust's picture

You mean zero yield on all my hard earmed money is not working?

Imagine that! Hard to beleive Mr Banker is complaining after Bankers got the biggest bonuses in history the last 10 years.

 

if people want to hang them i won't stand in their way.

The central planners's picture

In other words: we need more ISIS attacks on Europe. Common MOSSAD you can do it better.

Vageling's picture

That made me laugh! +1 Nice find =)

omniversling's picture

Tell that to the animals in Caracas zoo. The controllers consider us, for the most, milking cattle. Soon to be redesignated beef cattle.

ThirteenthFloor's picture

Negative interest rates

"Bankers breathing out their asshole". Dr. Willie

knukles's picture

I actually meant it Respectfully as in the Queen of England as a far more subtle and polite "Fuck the EU" than Mrs Nuland's.
But then again ...  I'm not quite sure what to think "then again" in this "Onion" reality

Winston Churchill's picture

"Don't mention the war" might be better.

knukles's picture

LOL +++++++++++++++

Seriously funny my man ......

GreatUncle's picture

Ironic how long was it since the last time Germany had to rebuild from going to zero? Near 70 years thats got to be a fucking record.

VAD's picture

It's gonna be a lot harder to rebuild when there are jews pillaging your financial system and eritreans raping your women all the damn time and German men are more interested in having sex with dogs than with their own women.  So yeah, they have some hurdles to overcome this time.

LadiesLoveCoolJames's picture

What decade will this be? Asking for a friend.

Infocat's picture

Let us hope Deutsche Bank finally dies a miserable death! http://www.truthjustice.net/

Ward no. 6's picture

why the god save the queen?

kings & queens through out history have been oppressors

Croesus's picture

Banksters...can't live with them, can't kill 'em (legally, at least not yet). 

Billy the Poet's picture

Quod est necessarium est licitum.

SmedleyButlersGhost's picture

Ahhh... Latin.  Brings back fond memories of The Christian Bros and the annual running of the altar boys. 

Handful of Dust's picture

I hope you're not also thinking of erecting a Christmas tree this year; Obama will most likely have you arrested.

Vageling's picture

So is jailing them fuckers for their malpractice. But I don't see much of that.