Deutsche Bank also hit: new financial crisis looming?
After the bank quake in the US, the tremors are reaching Europe. The share prices of Germany's largest financial institution, Deutsche Bank, dipped by almost 15 percent several times last week. Confidence in the banking system remains shaken, despite assurances from leading politicians. Europe's press discusses ways to restore it.
Inflation as the bigger risk
Observador takes a closer look at the central banks' risk assessment:
“Financial instability has the effect of cooling the economy by reducing lending. However, as this is done in a disorderly and potentially dangerous manner for the economy, it can trigger a recession. From this point of view, the central banks would be justified in pausing or reducing the intensity of their interest rate hikes to ease the pressure on commercial banks and the likelihood of further insolvencies. So far, however, the Federal Reserve and the ECB have taken the view that the financial sector is more resilient than in 2008 and that the distorting effect of inflation is much more dangerous for financial stability in the medium and long term.”
The bank crisis is spreading
The ECB could do more to combat financial market volatility, El País insists:
“Only yesterday [24 March] it emerged that Germany's largest bank had lost 8.5 percent of its stock market value. ... The crisis has not been resolved, Christine Lagarde's reaction has been slow and the measures were not forceful enough. ... For now both the Fed and the ECB have decided to go ahead with their plans so as not to jeopardise their credibility in the fight against inflation. ... There are signs of disorientation at the ECB, while the completion of the banking union after the financial crisis of 2008 is still pending. A community fund must finally be set up that guarantees the deposits of all citizens in the Eurozone.”
The crisis is not over yet, says Naftemporiki:
“The relative calm that has prevailed in investor circles since yesterday does not mean that the problems are over. On the contrary - what happened last Friday to Deutsche Bank, Europe's most systemically important group, raises uncertainty for the next few weeks at least. What is needed, therefore, is caution on the part of investors to anticipate possible further blows - but also to ensure that banks have sufficient reserves of strength to protect their equity securities from a possible temporary or complete devaluation. The idea being to avoid a drift of the deposit base and thus to safeguard their 'capital assets'.”