European Affairs

Deutsche Bank AG is the biggest immediate worry, as seen by the stock’s tumble Thursday (September 29) to multi-decade lows on reports that a few clients “limited their exposure” by pulling out cash and collateral and moving trading business to other banks.[1] On Friday (September 30), the stock rose six percent on press reports that the U.S. Department of Justice (DoJ) was close to settling for $5.4 billion in penalties for Deutsche Bank’s role in mis-selling mortgage-backed securities, well below the $14-billion fine initially tabled (see later).[2] The stock then lost ground on Monday (October 3) in U.S. trading when a fresh wave of press reports surmised the penalty could be higher than the $5.4-billion figure.[3] On Tuesday (October 4), the stock stabilized as the DoJ talks continued. Meanwhile, CEOs at four of Germany’s leading companies publicly endorsed Deutsche Bank on Monday (October 3), as did the head of JPMorgan Chase.[4]

The bank’s difficulties had crystallized in January when it posted its first full-year net loss (for fiscal 2015: $7.63 billion; €6.8 billion) since 2008, citing mounting “restructuring” costs ($1.12 billion; €1.0 billion) and a $5.83-billion (€5.2 billion) provision for fines and lawsuits. The company warned that a dividend was unlikely until 2017.[5] In 2014, the company had earned a profit of $1.9 billion (€1.69 billion). (See chart showing dividend payments between 2003 and 2014.) These problems matter given the bank’s rank among the top ten banks worldwide with about $1.79 billion (€1.6 trillion) in assets and its global reach, employing 100,000 people in 70 countries.[6] Its size also places it among the 30 banks deemed to be global systemically important banks by the Financial Stability Board.[7]

Since January, the bank’s share values have fallen 50 percent. In June, the stock was pummeled after its U.S. unit was one of only two banks to fail the Federal Reserve’s “stress test” and the International Monetary Fund said the bank was the world’s riskiest.[8] The latest wave of share-price declines occurred in mid-September after news reports that DoJ had put on the table its opening bid of a $14-billion fine.[9] DoJ will likely settle for less, but Deutsche Bank feels itself under pressure to finalize a deal before November 8 when U.S. elections determine the next President. Further, the bank may confront other settlement demands, too, including an investigation into its $10-billion Russian equity trading activities.[10] Only $6.2 billion (€5.5 billion) was held in litigation reserves as of June 30, though the bank said it expected to set aside more before the year ended. Paying these settlements will likely require Deutsche Bank to raise capital, diluting investors’ existing shares, meaning that each shareholder will hold a smaller percentage of the company (hence, whatever profits the bank distributes, the amount would be spread among more shareholders).

CHART: DEUTSCHE BANK SHARE VALUE IN 2016 (NYSE: DB)
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Source: Yahoo Finance

CHART: DEUTSCHE BANK’S DIVIDENDS HAVE BEEN FLAT IN THE LAST SIX YEARS
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Source: Moody’s

The banks’ bonds ($5.15 billion; €4.6 billion), called contingent-convertible bonds, are also under assault. Known as “CoCos,” these bonds automatically convert Deutsche Bank debt into equity when the bank’s capital falls below a certain threshold. Seen as a safety valve as part of the GFC reforms, the instruments were intended to put the burden on investors to suffer the costs of a bank collapse, transferring the risks from governments and taxpayers and exerting discipline on banks’ appetites for risk-taking. (One study, though, shows “CoCos” had a negative impact on the creditworthiness and firm value of Lloyds Banking Group in 2009 after being issued.[11] ) The value of Deutsche Bank’s “CoCos” has dropped with the yield recently hitting 13 percent (as yields rise, the value of bonds falls), according to TradeWeb data. Trax data shows the volume has skyrocketed, with more “Cocos” trading in September than the total amount between May and August combined.[12] Deutsche Bank’s condition has to worsen more before triggering the equity conversion.

CHART: DEUTSCHE BANK COCO BONDS PRICING
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Source: Marion Dakers, “Why is Deutsche Bank now the biggest worry in the financial world?” Daily Telegraph (U.K.), September 29, 2016 http://www.telegraph.co.uk/business/2016/09/29/why-is-deutsche-bank-now-the-biggest-worry-in-the-financial-worl/ .

CHART: SPILLOVER FROM DEUTSCHE BANK TO GLOBALLY SYSTEMICALLY IMPORTANT BANKS

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Source: IMF. Staff calculations based on the Diebold and Yilmaz (2014) methodology and daily equity returns from Oct. 11, 2007, to Feb. 26, 2016. Groupe BPCE and the Agricultural Bank of China (ABC) not included due to lack of public traded data and short sample size. “The blue, purple and green nodes denote European, US and Asian banks, respectively. The thickness of the arrows captures total linkages (both inward and outward), and the arrow captures the direction of net spillover. The size of the nodes reflects asset size.” (IMF)
Adding to the clouds gathering over Europe’s banks, whose stocks have generally been battered since January, is another German bank, Commerzbank AG. It announced last Thursday (September 29) staff layoffs and an extensive overhaul (See chart on Euro STOXX index for banks.) "We simply don't earn enough money to lead the bank sustainably and successfully into the future. And this situation will get worse if we don't do something about it," chief executive Martin Zielke said in a note to employees, Reuters reported.[13] Over the year, Commerzbank shares have fallen 40 percent.

What the problems that both German banks highlight is the difficulties of banks’ business models generally when interest rates turned negative and Europe’s low-inflation economy remains sluggish. Fears of a deflation trap (in which asset prices fall over time freezing demand) and of record high levels in sovereign and household debt worldwide, which combined is growing faster than global GDP growth, add to the macroeconomic uncertainties, as the IMF’s global economic outlook (released Tuesday, October 4) shows.[14]

Traditionally, banks profited in part on the margins they earned between the costs of borrowing money from central banks and customers and relending those funds at higher interest rates. Negative interest rates through the ECB’s stimulus plan mean banks have little if any margin to earn for lending activities. Other banking activities – earning fees on underwriting securities underwriting, proprietary financial products development, intermediary roles for trading, and advisory services for mergers and acquisitions – are growing slowly, at best. These activities, though, carry greater risks, and while they can be the largest source of profits, the losses, magnified by high levels of leverage, can be crippling.

These challenges have led to an “absence of profits” in one analyst’s words. Such conditions, said Tidjane Thiam, chief executive of Credit Suisse, make the sector “not really investable.”[15] According to Bloomberg, “Euro zone bank earnings have fallen 80 percent since the end of 2007 and analysts estimate a nine-percent drop this year.”[16] That has led to a sharp downturn in European banks’ shares generally.

CHART: PERFORMANCE OF EUROPEAN BANKS
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Source: Wolf Richter, “EU Banking Mayhem, One Bank at a Time, then All at Once.” September 28, 2016. http://wolfstreet.com/2016/09/28/eu-banking-mayhem-one-bank-at-a-time-then-all-at-once/ .

CHART: BANKS SHIFT BUSINESS MODELS TOWARD RETAIL ACTIVITIES
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Source: European Central Bank, Financial Stability Review. “Recent trends in euro area banks’ business models and implications for banking sector stability.” May 2016. https://www.ecb.europa.eu/pub/pdf/other/sfcfinancialstabilityreview201605.en.pdf?ecb712f83f124c11f45abe4e48cac2d0 .

CHART: BANKS DIVERSIFY INCOME
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Source: European Central Bank, Financial Stability Review. “Recent trends in euro area banks’ business models and implications for banking sector stability.” May 2016. https://www.ecb.europa.eu/pub/pdf/other/sfcfinancialstabilityreview201605.en.pdf?ecb712f83f124c11f45abe4e48cac2d0 .

For Deutsche Bank, its business grew dramatically in serving as an intermediary for hedge funds, with “[$47.07 billion] €42 trillion worth of derivatives that sit on its books, an amount about 11 times the size of the German economy,” according to one analysis. “The market value of that figure, €18 billion, [though] is a lot lower….”[17] Further, the bank is highly levered by a ratio of 25 to 1, according to some analysts, meaning the a mount of assets supported with equity after liabilities are subtracted. A large portion of those assets are “level 3,” held in securities that do not have active markets with “observable” prices through trades to calculate their values, relying instead on assumptions and models to determine “fair value.” Hence, “valuation of level 3 assets is inherently uncertain,” says professor Robert Pozen of MIT. Studies show that banks with high levels of level 3 assets are prone to default.[18] These balance-sheet issues partly explain investors’ concerns despite Deutsche Bank’s $246.54-billion (€220 billion) cash cushion.

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Source: Laura Noonan, “Balance sheet doubts widen German lender’s credibility gap.” Financial Times, September 30, 2016. www.ft.com.

Non-performing loans and non-core assets are part of the enormous difficulties, too, for Europe’s banks. “With an average ratio at 5.7% in March 2016 – NPLs in the EU remain up to three times higher than other global jurisdictions,” according to the European Banking Authority.[19] As the vice-president of the ECB, Vítor Constâncio, explained in a July speech: “First, a large stock of legacy non-performing assets in certain banking sectors continues to dampen profitability prospects of banks with high NPLs that consume capital and do not generate revenue while it also ties up operational capacity and involves legal, as well as administrative costs. The problem of NPLs is more related to its impact on profitability that on the robustness of balance sheets, as the coverage by provisions and collateral is 95% on average.”[20]

CHART: NON-PERFORMING LOANS AND FORBORNE LOANS FOR TOTAL ON-BALANCE LOANS AND ADVANCES PER COUNTRY OF ORIGIN OF THE BANK (MARCH 2016)
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Source: European Banking Authority, “EBA provides updates on NPLs in EU banking sector.” July 22, 2016. https://www.eba.europa.eu/-/eba-provides-updates-on-npls-in-eu-banking-sector .

CHART: EVOLUTION OF IMPAIRED LOANS, 2007 - 2015
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Source: European Central Bank, “Draft Guidance to Banks on Non-Performing Loans.” September 2016. https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/npl/npl_guidance.en.pdf .

CHARTS: BANK PROFITABILITY MODERATELY IMPROVED IN 2015 AND NET INTEREST INCOME PROVED RESILIENT
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Source: Vítor Constâncio, Vice-President of the ECB, “Challenges for the European banking industry.” Speech, July 7, 2016. http://ritholtz.com/2016/07/challenges-european-banking-industry/ .

What “GFC I” showed was the power and necessity of confidence in financial markets and how quickly that confidence can implode. Once that happens, investment banks and other financial institutions cannot sell assets, or those asset values plummet, in a vicious downward cycle of falling confidence that lowers share prices, which, in turn, further destroys confidence. It becomes the challenge for governments and regulators to help rebuild that confidence, typically, through initial “shocks” to the market, safety nets, and unprecedented stimulus programs that pump liquidity into the economy by lowering borrowing costs and expanding credit availability.

That is the focus of the debate now in Europe, what should national governments, national central banks, Brussels, the ECB, and regulators can do, and for what short, medium, and long-term result? This, as the markets, cauldrons of emotions, demand actions to staunch the share price rout for banks before contagion worldwide sets in. This, too, as an unprecedented campaign by the ECB has yet to fuel robust sustainable growth and jump-start inflation in Europe.

IMF Managing Director Christine Lagarde on September 28 said that she doesn't see Deutsche Bank "at a stage where state intervention is absolutely called for at the moment. I would hope that the right measures are taken internally so that the whole financial sector in Germany is solid and that systemic players [are] strengthened.”[21]

But Andrea Enria, chairman of the European Banking Authority, expressed open-mindedness to some form of state aid if eventually needed. “I think the authorities should consider whether if the process is not going fast enough…state aid could be part of the ingredients to accelerate this process.” Europe’s bad-loan problem is “three times as high as other major jurisdictions such as the U.S. or Japan,” he said.[22]

European policy is now structured to favor investor “bail-ins” as opposed to taxpayer “bailouts;” investors should first absorb losses before public funds are provided, the rationale goes. EU member-countries were unanimous in avoiding a repeat of the $1.79 trillion (€1.6 trillion) in taxpayer support to banks during GFC I. No bank can be bailed out with public money until creditors have shouldered at least 8 percent of the lender’s liabilities under rules that took effect in January.

More regulation and oversight is needed for NLPs, the EU’s three supranational regulators for the financial markets said in their semiannual report released in September. “Insufficiently addressed asset quality concerns and persistent high level of NPLs are a significant driver of uncertainty in the EU banking sector,” they said. “Given the widespread, and thus systemic, nature of the significant challenges related to NPL, European supervisors, regulators and legislators should consider pursuing a coordinated, articulated and more decisive approach to this matter.”[23] Towards this end, the ECB is working on guidance for the handling on NPLs.[24] The public consultation ends November 15.

A stronger secondary market is needed, too, according to EBA. “A third area relates to the liquidity, transparency and efficiency of secondary market in loans to facilitate the disposal of NPLs. Enhanced transparency regarding the state of NPLs and real estate collateral valuation would contribute to a better understanding and pricing of the risks and, ultimately, facilitate the sale process and lead to lower discounts in secondary market transactions. The establishment of asset management companies (AMCs) – with or without public support – can also play a key role in resolving NPLs and is a key factor in price discovery. The EBA concludes that the revival of the EU market for debt securitisation may be a way of widening the range of options that banks could consider for dealing with their NPLs, but stressed the need for supervisory guidance in tackling NPLs, particularly in collateral valuation and arrears management.”

Mario Draghi, the ECB president, suggested Europe is over-banked. “Such over-capacity also means the sector does not operate at the efficient frontier, which is one reason why cost-to-income ratios remain high in some countries,” Draghi said.[25] “In the late 1990s,” he said, “the ratio of total bank assets to equity and private bond market capitalization in Europe was below two. By 2008, this ratio had risen to four. By contrast, the comparable ratio in the US remained below one over this period, and that of Japan remained below two.”

Looming further in the background is the extent to which banks will need to boost their capital reserve requirements. Under the global, voluntary regulatory framework “Basel III,” capital and liquidity requirements and leverage limits are established. Valdis Dombrovskis, a vice president of the European Commission, worried that the tools banks use to calculate compliance with these requirements, specifically their own models for calculating risks, may be utilized, which in turn could mean that banks need to build higher levels of reserves. Basel III “would imply significant capital requirement increases in all areas” and threaten to put EU banks “at a disadvantage compared to our global competitors,” he said.[26] Some members of the EU Parliament, though, have questioned that thinking, seeing the capital requirements as essential to lessening banks’ vulnerability and, hence, taxpayers’ liability should a GFC II occur.

Another regime for capital reserves (total loss-absorbing capacity or “TLAC”) is imposed on the 30 banks identified as “global systematically important banks.” The Financial Stability Board set the compliance deadline for January 1, 2019. These rules “will support the removal of the implicit public subsidy enjoyed by systemically important banks,” said Mark Carney, governor of the Bank of England and chairman of the FSB.[27] To comply, the FSB estimates that the banks would be required to raise as much as $1.19 trillion (€1.11 trillion) of loss-absorbing securities by 2022.

The drive of EU policies after GFC has been to buffer taxpayers from absorbing the costs of failed banks, a political Maginot line that German Chancellor Angela Merkel is unlikely to cross, especially given the German federal elections in 2017. Yet, faced with the liquidation of a major bank and the potential spillover effects given the highly interdependent relationships among Europe’s banks, and with historical memories short, it’s reasonable to doubt if politicians and regulators will have the courage to wait out the tempest without “doing something.” Domestic politics inevitably are part of the complex calculus in figuring out responses to guard Europe’s banks against faltering.
To paraphrase Albert Einstein, as far as the laws of finance “refer to reality, they are not certain; and as far as they are certain they do not refer to reality.” Perhaps, that “reality” again leaves policymakers faced with impossible choices and uncertain outcomes, the lessons learned from GFC I as enlightening as they are obfuscating the compass points.

James Spellman is an independent financial consultant with Strategic Communications LLC


[1]Deutsche Bank shares tumble after report says some clients reduce collateral on trades.” Marketwatch, September 29, 2016. http://www.marketwatch.com/story/deutsche-bank-shares-tumble-after-report-says-some-clients-reduce-collateral-on-trades-2016-09-29 .
[2]Luc Olinga and Tom Barfield, “Berlin Deutsche Bank pressure eases as US fine looks smaller.” AFP, September 30, 2016. https://www.yahoo.com/news/deutsche-bank-near-5-4-bn-us-toxic-152407547.html .
[3]Georgina Prodhan, Kathrin Jones and Lawrence Delevingne, “Deutsche Bank shares slip again in race to reach U.S. settlement.” Reuters, October 3, 2016. http://www.reuters.com/article/us-germany-deutsche-bank-idUSKCN1220NA .
[4]Deutsche Bank defended by German firms.” BBC, October 2, 2016. http://www.bbc.com/news/business-37536833 . Jeff Cox, “JPMorgan CEO Dimon: There is no reason Deutsche Bank should not get over its problems.” CNBC, October 3, 2016. http://www.cnbc.com/2016/10/03/jpmorgan-ceo-dimon-there-is-no-reason-deutsche-bank-should-not-get-over-its-problems.html .
[5]Jenny Strasburg, “Deutsche Bank Reports First Full-Year Loss Since Crisis.” Wall Street Journal, January 28, 2016.
www.wsj.com . Deutsche Bank press release, “Deutsche Bank reports 2015 fourth quarter net loss of EUR 2.1 billion and full year net loss of EUR 6.8 billion.”
https://www.db.com/newsroom_news/2016/medien/deutsche-bank-reports-2015-fourth-quarter-net-loss-of-EUR-2-1-billion-and-full-year-net-loss-of-EUR-6-8-billion-en-11378.htm .
[6]Deutsche Bank, Annual Report 2015. https://annualreport.deutsche-bank.com/2015/ar/servicepages/welcome.html .
[7]FSB, “2015 update of list of global systemically important banks.” November 3, 2015. http://www.fsb.org/wp-content/uploads/2015-update-of-list-of-global-systemically-important-banks-G-SIBs.pdf .
[8]Friedrich Geiger and Ryan Tracy, “Deutsche Bank Shares Hit Over 30-Year Low After Fed, IMF Rebuke.” Wall Street Journal, June 30, 2016. Federal Reserve stress test results: https://www.federalreserve.gov/newsevents/press/bcreg/20160629a.htm . (“The Federal Reserve objected to the capital plans of Deutsche Bank Trust Corporation and Santander Holdings USA, Inc. based on qualitative concerns.”) IMF: “Among the G-SIBs (globally systemically important banks), Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse,” said the IMF Financial Sector Assessment Program. Also, “Deutsche Bank AG, on the other hand, is found to be a major source of outward spillover to publically listed banks in Germany and some insurance companies. Further, it is one of the most important net contributors to systemic risks in the global banking system.” https://www.imf.org/external/pubs/ft/scr/2016/cr16191.pdf .
[9]Aruna Viswanatha, Jenny Strasburg, and Eyk Henning, “Deutsche Bank Is Asked to Pay $14 Billion to Resolve U.S. Probe Into Mortgage Securities.” Wall Street Journal, September 19, 2016. www.wsj.com .
[10]Ed Caesar, “Deutsche Bank’s $10-Billion Scandal: How a scheme to help Russians secretly funnel money offshore unraveled.” New Yorker, August 29, 2016. http://www.newyorker.com/magazine/2016/08/29/deutsche-banks-10-billion-scandal . “They were a way to expatriate money. Because the Russian company and the offshore company both belonged to the same owner, these ordinary-seeming trades had an alchemical purpose: to turn rubles that were stuck in Russia into dollars stashed outside Russia. On the Moscow markets, this sleight of hand had a nickname: konvert, which means ‘envelope’ and echoes the English verb ‘convert.’ In the English-language media, the scheme has become known as ‘mirror trading.’ “
[11]Carolin E. Schmidt and Ted F. Azarmi, “The Impact of CoCo Bonds on Bank Value and Perceived Default Risk: Insights and Evidence from Their Pioneering Use in Europe.” Journal of Applied Business Research 31(6) (2015), 2297-2306 (2015). http://ssrn.com/abstract=2524019 or http://dx.doi.org/10.2139/ssrn.2524019 . “Contingent convertible (CoCo) bonds convert to equity during financial distress. They help transfer the responsibility for bearing the costs of poor performance from the taxpayers to the bank owners. Our results are thus relevant for investors, financial decision-makers, and regulators. We analyze the effects of the pioneering use of CoCos in Europe by Lloyds Banking Group in 2009. The bank’s motivation for the issue is explored, considering both its economic situation and the Basel III regulations. We document a reduction in the bank’s market value following the announcement of the intention to issue CoCos. Simultaneously, the credit default swap spread goes up.” Also, see: Mark J. Flannery, “Stabilizing Large Financial Institutions with Contingent Capital Certificates.” October 6, 2009. http://ssrn.com/abstract=1485689 or http://dx.doi.org/10.2139/ssrn.1485689 . " ‘Contingent capital certificates’ can greatly reduce the probability that a large financial firm will suffer losses in excess of its common equity, and will provide market discipline by forcing shareholders to internalize more of their assets' poor outcomes.”
[12]Marion Dakers, “Why is Deutsche Bank now the biggest worry in the financial world?” Daily Telegraph (U.K.), September 29, 2016 http://www.telegraph.co.uk/business/2016/09/29/why-is-deutsche-bank-now-the-biggest-worry-in-the-financial-worl/ .
[13]Jonathan Gould, “Germany's Commerzbank cuts nearly 10,000 jobs, halts dividends.” Reuters, September 29, 2016. http://www.reuters.com/article/us-commerzbank-restructuring-idUSKCN11Z13T?il=0 .
[14]IMF, Global Economic Outlook. October 2016. http://www.imf.org/external/pubs/ft/weo/2016/02/ . Also, see:
David T. Beers and Jean-Sébastien Nadeau, “Database of Sovereign Defaults, 2015.” Bank of Canada Technical Report No. 101. http://www.bankofcanada.ca/wp-content/uploads/2014/02/tr101.pdf . Elaine Moore, “Sovereign borrowers fall behind on record sums of debt,” Financial Times, September 6, 2016. www.ft.com . “The study paints a bleak picture of global sovereign solvency, suggesting that arrears, default and debt restructuring are an even more frequent feature of public finance than already thought.”
[15]Philip Oltermann and Jill Treanor, “Europe's banks 'not investable' says top banker amid Deutsche Bank crisis.” The Guardian (U.K.), September 28, 2016. https://www.theguardian.com/business/2016/sep/28/deutsche-bank-john-cryan-denies-asking-german-government-help .
[16]Lionel Laurent, “Mario Draghi Wants Fewer Banks. Good Luck With That!: Gadfly.” Bloomberg, September 23, 2016. http://www.swissinfo.ch/eng/mario-draghi-wants-fewer-banks--good-luck-with-that---gadfly/42468832 .
[17]Landon Thomas, Jr., “Deutsche Bank’s Appetite for Risk Throws Off Its Balance.” New York Times, October 3, 2016. www.nytimes.com http://www.nytimes.com/2016/10/03/business/dealbook/deutsche-banks-appetite-for-risk-throws-off-its-balance.html?_r=0 .
[18]For example, see: Markus Glaser, Ulf Mohrmann, and Jan Riepe, “A Blind Spot of Banking Regulation: Level 3 Valuation and Basel Risk Capital.” March 21, 2013. https://fp7.portals.mbs.ac.uk/Portals/59/docs/KNPapers/Jan%20Riepe.pdf .
[19]European Banking Authority, “EBA provides updates on NPLs in EU banking sector.” July 22, 2016. https://www.eba.europa.eu/-/eba-provides-updates-on-npls-in-eu-banking-sector .
[20]Vítor Constâncio, Vice-President of the ECB.
http://ritholtz.com/2016/07/challenges-european-banking-industry/ .
[21]Jonathan Gould, “Germany’s Commerzbank cuts nearly 10,000, halts dividend.” Reuters, September 30, 2016.
http://in.reuters.com/article/us-commerzbank-restructuring-idINKCN11Z13T .
[22]Julia-Ambra Verlaine and Todd Buell, “European Regulators Weigh State Aid for Troubled Banks.” Wall Street Journal, September 28, 2016. www.wsj.com .
[23]Boris Groendahl, “Banks’ Bad Loans Declared Systemic Challenge for European Banks.” Bloomberg, September 7, 2016. http://www.bloomberg.com/news/articles/2016-09-07/banks-bad-loans-declared-systemic-challenge-for-european-banks . Report: “Joint Committee Report on Risks and Vulnerabilities in the EU Financial System.” (August 2016). https://www.eba.europa.eu/documents/10180/1360107/JC+2016+47+RSC+-+Joint+Risk+Report+-+Autumn+2016.pdf .
[24]European Central Bank, “Draft Guidance to Banks on Non-Performing Loans.” September 2016. https://www.bankingsupervision.europa.eu/legalframework/publiccons/pdf/npl/npl_guidance.en.pdf .
[25]Mario Draghi, “Speech by Mario Draghi, President of the ECB and Chair of the European Systemic Risk Board,
at the first annual conference of the ESRB, Frankfurt am Main.” September 22, 2016. He cites: M. Pagano, S. Langfield, V. Acharya, A. Boot, M. Brunnermeier, C. Buch, M. Hellwig, A. Sapir, and I. van den Burg, “Is Europe overbanked?” ESRB Advisory Scientific Committee Report no.4 (2014). https://www.ecb.europa.eu/press/key/date/2016/html/sp160922.en.html .
[26]Silla Brush, “EU Calls for Sweeping Changes to Basel Bank-Capital Proposal.” Bloomberg, September 29, 2016. http://www.bloomberg.com/news/articles/2016-09-29/eu-calls-for-sweeping-changes-to-basel-bank-capital-proposals .
[27]Viktoria Dendrinou, “Big Banks Could Be Forced to Raise Up to $1.19 Trillion in New Securities.” Wall Street Journal, November 9, 2015. www.wsj.com .