A quick Deutsche ‘splainer

Is it a crisis! not really

A brief Q&A, directed at the seemingly quite substantial proportion of the financial internet who feel like they had so much fun in September 2008 that they want to believe the same thing is happening again and again…

1. Is it insolvent?

No.

2. Would it be insolvent if it got a USD14bn fine?

Also no.

3. Would it be below minimum regulatory capital levels if it got a 14bn fine?

Also no

4. Would its CoCo bonds trigger if it got a 14bn fine?

No.

5. Would it have to miss a single coupon on its CoCo bonds if it got a 14bn fine?

Possibly but not necessarily

6. Wouldn’t that mean it had defaulted?

No. CoCo bonds are meant to miss coupons occasionally in exactly this sort of situation.

7. If it got the 14bn fine, and a load of other fines and unspecified other bad things happened, would Deutsche be below its regulatory capital minimum then?

Well … I can see that you’re going to add worst case scenarios up until the answer is yes, so yes I suppose.

8. So then it would need a bailout?

No, then it would need to agree a capital plan

9. But what if nobody was prepared to give it the capital?

Whoa there. I said “agree a capital plan”. That would mean possibly converting CoCos, clawing back bonuses and reducing assets over a period potentially covering several years

10. But something something state bailouts!

I have already agreed you can construct a scenario to deliver any result you like. But let’s be clear that’s what you’re doing here.

11. So you’re a bull of Deutsche! How’s that work out for you ha hah ha (picture of graph)

You appear to be quite confused about the difference between share prices and bank solvency.

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