Henry Grunfeld Chair of Banking, Professor Peter Hahn was invited into the studios of BBC Business Daily (4 October) to discuss the ongoing troubles at Deutsche Bank and whether we are heading towards another banking crisis
The troubled German Bank faces a $14bn fine from the Department of Justice in the United States and would potentially require a bail out should regulators demand the fine to be paid in full.
When asked whether there might be any room for negotiation, Dr Hahn said:
“I’d be surprised if it is even as high as $6bn; fines in the banking industry are not always what they seem. The majority goes to support customers who have lost money and it is a complex formula. Also, this fine dates to back before the financial crisis, from different management and different errors past.”
The interview then examined the political consequences of the fine, where Dr Hahn was asked whether US authorities were looking to impose fines on the bank in retaliation for the EU’s targeting of Apple. Dr Hahn said:
“The fine business has been going on for a long time; several European banks tried to enter the US mortgage market, which in hindsight was a poor strategic decision. It would have been a lot less painful for Deutsche Bank to settle five years ago.”
Would a potential bail out then leave the Euro banking system vulnerable to another crisis?
“The European banking system was made for higher interest rates – of around three to five per cent – banks aren’t profitable. A healthy banking system is required for a healthy economy, but it is sick and is going to get sicker. Regulation has made things safer, but there is a price to pay for this safety and we are starting to pay it.”
Dr Hahn was then asked whether the biggest risk we face the uncertain political landscapes in both the US and Europe?
“Deutsche Bank has more than 20 million customers. Disruption would affect lots of parties and no one wants to see that. What we might see is a new Deutsche Bank, but it’s not going away.”
You can listen to the interview in full here
at 3:30 minutes in.