Olaf Scholz dismisses fears over Deutsche Bank |
Germany’s chancellor Olaf Scholz attempted to reassure markets on Friday after the cost of Deutsche Bank’s 5-year credit default swaps, used to insure against the risk of it not paying debts, jumped to a four-year high. Shares in the lender fell as much as 14% before closing down 8.5% in Frankfurt - a five-month low. Concerns were raised about Deutsche’s exposure to US commercial real estate lending, where the bank has $16.8bn outstanding, and its large derivatives book. But Scholz said there was no reason to be concerned, adding that Deutsche “has fundamentally modernised and reorganised its business and is a very profitable bank.” Concerns over the banking sector continue to swirl following Credit Suisse’s collapse. Shares in Commerzbank and Société Générale also fell on Friday, by 5% and 6%, respectively. Fidelity International’s Salman Ahmed says: “There is a trust deficit in the market,” explaining that the tightening in monetary policy by central bankers over the past year was “starting to shake some of those foundations of the banks, in ways that were unexpected.”