Hedge funds have started to pull some of their business from Deutsche Bank, setting up a potential showdown with German authorities over the future of the country’s largest lender.
As its shares fell sharply in New York trading, Deutsche was forced to issue a statement emphasising its strong financial position.
European regulators and government officials have kept a low profile in public over Deutsche’s deepening woes. However, in private they have struck a sanguine tone, stressing that in extremis there is scope under European regulation to inject state funds to support the bank, provided it is done in line with market conditions.
Marcel Fratzscher, head of DIW Berlin, a think-tank, said: “If push comes to shove, the German government would contribute because Deutsche Bank is the only global bank that Germany has.”
A person briefed on the situation at Deutsche said some of the bank’s hedge fund clients had imposed risk limits on the business they do with it in response to the negative headlines swirling around the lender.
The woes of German banks were further underlined yesterday as Commerzbank, Germany’s second-biggest lender, unveiled plans to cut 9,600 jobs and scrap its dividend “for the time being” to boost its flagging profitability.