It is becoming very clear that the Deutsche Bank debacle is getting very serious. How do we know? Simple - everyone is denying everything. Overnight DB CEO Cryan denied any need to raise capital or need a bailout; this morning ECB's Draghi denied low rates were responsible, and denied The IMF's statement the bank is systemically important; and now IMF's Lagarde is denying any need for government intervention.
Mario Draghi said the financial industry must stop blaming the actions of central banks for their problems and focus on fixing internal management and risk failings.
“Many banks have problems that don’t have primarily to do with the low level of interest rates but possibly with other reasons,” the European Central Bank president said after a meeting with German lawmakers in Berlin on Wednesday.
He cited business models and risk management and said this was “generally acknowledged” by those at the talks.
As Bloomberg reports, when asked about accusations by some in the financial industry that the ECB is to blame for some banks’ woes, Draghi said he didn’t share that view.
“If a bank represents a systemic threat for the euro zone, this cannot be because of low interest rates,” he said. “It has to do with other reasons.”
While correlation is not causation - as everyone says when trying to prove a false positive - in this case we can't help but think Draghi's handiwork certainly didn't help...
Then IMF Chief Christine Lagarde piped in, telling CNBC that...
"Deutsche Bank is a systemic important player in the global financial system.
But, is on a solid base currently, and we are not at a stage in which I see the need for a government intervention."
So to clarify:
- DRAGHI: DEUTSCHE BANK DOES NOT POSE SYSTEMIC RISK
- LAGARDE: DEUTSCHE BANK SYSTEMICALLY IMPORTANT
Yeah, you're right, its probably nothing...
So, as we asked overenight, who blinks first? The IMF - "told you so" dance. The ECB - knowing the collateral chains that will snap. The Bundesbank - knowing their entire banking system is at risk. The German government - knowing it's over for them if DB depositors have to take a haircut... Or Brussels - who know the entire EU plan is teetering is done if anything but the 'rules' are applied to Deutsche. For now, there is one thing for sure - the market will press for one of these players to be forced to make decision.