Deutsche Bank’s current troubles will not turn into a “Lehman moment,” according to Allianz’s chief economic adviser, Mohamed El-Erian.
El-Erian on Thursday told Bloomberg TV that the German lender’s current turmoil will not lead to “a sudden stop to the global economy,” like the one that followed Lehman Brothers’ 2008 failure.
For one thing, he said, the global banking system is stronger than it was in the years leading up to the financial crisis. And, unlike Lehman, Deutsche Bank “actually has liquidity,” he added.
US authorities have fined Deutsche Bank for as much as $14 billion for alleged improprieties involving mortgage-backed securities — a fine almost as large as the firm’s market value. That stoked rumours that Germany may need to bail the bank out — something authorities denied.
The firm’s shares have suffered since news of the fine broke, but are currently in recovery mode following a report that the German government is pursuing talks with US authorities to help settle the fine quickly.
“It is a warning that European banks are still under pressure,” El-Erian said on Thursday.
“It is a warning that if we’re not careful, that is going to create an extra headwind to European growth. And it is a warning that Deutsche Bank needs a new business model.”
Deutsche Bank on Thursday announced it would cut another 1,000 jobs in Germany, in addition to the 3,000 already announced in 2015.
Here’s the Bloomberg TV interview:
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