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Deutsche Bank's Predicament
The Deutsche Bank is one of the key economic factors in the European economy. Founded over 146 years ago in Berlin. Since 1870 the Deutsche Bank has been in the business of being a specialist bank for foreign trade. Over the years, Deutsche Bank has grown into what it is today and no longer just a specialized bank, but has been involved in all areas of business through the years. In German the words “Deutsche Bank” means “German Bank” but it is not just a German bank but a globalized banking and financial service company. From being added to the New York Stock Exchange to retail banking to owning and operating a casino in Las Vegas, Deutsche Bank has dipped its toes in all areas of business. For the European economy, Deutsche Bank could cause some severe issues with their recent crisis. These serious issues and their impact will affect the rest of the world’s economy as well. The world economy over the past ten years has not been at its peak. When one country is facing an economic crisis it affects the world as a whole because of globalization. Globalization is defined as a process driven by international investment and trade. The Deutsche Bank is a globalized company that has gotten itself into quite a bit of trouble. They a choosing to not have the governments help in bailing themselves out but would rather try and fix their problems themselves.
The Deutsche Bank’s problems became apparent when their stock price started to decline swiftly. According to Simon Nixon in his article for the Wall Street Journal, the decline was not caused by fear of the investors or concerns over capital but a loss of confidence in the bank’s business model. Investors have doubts about Deutsche Bank’s return on equity. The increased regulation over the years has injured the bank’s ability to produce the return on equity investors want to see. The inflation rates and corporate activity have also impacted Deutsche Bank. They have been experiencing lower trading income and higher capital requirements. Everything that is affecting the Deutsche Bank is not a result of the European malaise but a crisis of globalization according to Simon Nixon. The global financial crisis has left world economy vulnerable and Deutsche Bank is just a victim of the vulnerability.
Germany is one of the leading countries in the European economy. With the recent economic troubles across Europe, as well as the globe, is has not been immune to the problems. Deutsche Bank’s crisis has not helped the European economy escape from the rest of the worlds financial troubles. Carolynn Look and Chad Thomas of Bloomberg inform readers that the bank’s issues hit home for a lot of Europeans and the ramifications are not limited to inside the boarders of Germany. With Deutsche Bank’s shares become less and less valuable due to their weakening financial position the bank may have to pay for mortgage-backed securities at a penalty of $14 billion. They just are not meeting the standards that need to be met as a globalized company. The Deutsche bank cannot afford to pay this fine. Deutsche Bank does not want to enlist the help of the government to help them get out of their problems like corporations before them but are choosing to take matters into their own hands. They have already been eradicating jobs over the years in the expectation of restoring the profitability of the bank. Firing employees is just one way they have been trying to solve their own crisis.
Globalization has a lot of benefits as well as complications. The world has become a smaller place thanks to globalization as well as the innovation of technology. Deutsche Bank is one of the many corporations that rely on globalization to get their business done. They have international shareholders and deals to handle all around the globe. In the European Journal of Social Theory, Jean-Sebastien Guy wrote about globalization, stating, “Two previous approaches – global modernity and global consciousness – interpret the world as completely objective (nature transcends culture)." He researched globalization and came up with different ways to look at it based on the theories of others. Deutsche Bank is globalized and as a result has to have global consciousness. How they operate affects not only them, but also the European and world economies. When shareholders stopped having faith in them, the stock price fell and the bank as a whole took a serious hit. The Deutsche Bank makes up a large portion of the European economy and that is not something to be taken lightly. Deutsche Bank is on the world stage and everyone is in the audience waiting to see what their next move is and how they will recover from this crisis.