TROUBLED Deutsche Bank’s huge exposure means the firm could have a devastating impact on Europe’s financial system if it were allowed to fail, experts have warned.
Germany’s biggest bank reportedly has a $45 TRILLION (£34trn) portfolio of underlying assets that its clients are taking a position in – which equates to more than 10 times Germany’s entire GDP.
And the problem is that no one really knows what’s makes up Deutsche’s book of exposure and so-called derivatives book because it’s so opaque and complicated, according to Michael Hewson, chief market analyst at CMC Markets UK.
He told Express.co.uk: “Deutsche has the biggest derivatives book in the world, and people will say that its hedged to a greater or lesser extent, but it’s the interconnectedness with the rest of the system that is the problem.
“There doesn’t seem to be transparency about what’s in its book. No one really knows what the ripple-out effects would be.
“That makes Deutsche radioactive about whether or not I would want to invest in it.”
A bank becomes a risk to the financial system as a whole when the degree to which it is interconnected with other institutions increases.
Deutsche Bank is currently a counterparty to virtually every major bank in the world, in virtually all asset classes.
Full article: Why ‘radioactive’ Deutsche Bank could go nuclear at any time, experts warn (Express)