Global financial crash fears after Deutsche Bank ‘bloodbath’ puts shares on life support
Deutsche Bank‘s shares have tumbled more than 13 percent while its credit default swaps surged to the highest since they were introduced in 2019. The German bank’s crisis comes amid global concern about the banking sector following the turmoil facing Silicon Valley Bank (SVB), Signature Bank and Credit Suisse.
Investors have been rattled by recent events, and concerns are unlikely to be eased as the UK and US see interest rates rise yet again.
US banks suffered losses on Thursday after US Treasury Secretary Janet Yellen said she would guarantee the deposits of the banks in crisis.
Deutsche Bank’s predicament has been branded a “bloodbath” in the media.
Meanwhile, Chris Beauchamp, chief market analyst at IG, said: “We are still on edge waiting for another domino to fall, and Deutsche is clearly the next one on everyone’s minds (fairly or unfairly).
“Looks like the banking crisis hasn’t been entirely put to bed.”
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Earlier this month, fears regarding the banking sector started in the US when SVB collapsed.
The bank is known predominantly for services in the technology industry and had benefitted from low-interest rates.
But, SVB suddenly entered a crisis when customers withdrew their deposits.
The bank has also invested in government bonds, but the value of these dropped when interest rates rose.
SVB then announced it would sell $2.25billion (£1.8billion) in new shares to plug the hole in its finances, provoking many customers to withdraw their cash. The bank’s stocks then plummeted.
Credit Suisse has come under scrutiny for years, with many casting doubt over how profitable the bank is.
The Saudi National Bank, a major backer of the Swiss bank, subsequently withdrew its funding. Then, other banks did the same.
Credit Suisse was saved by its rival UBS for $3.15billion (£2.6billion).
