Deutsche Bank’s announcement of its plans to repay $1.5 billion of subordinated debt five years before its maturity has caused fear and nerves in the European financial markets. The most important bank in Germany saw its shares lose 8.5% on the Frankfurt stock exchange, dragging down the values of the sector on the continent. Although it’s almost a relief considering how it came to leave 14% at one point in the morning.
Following Deutsche Bank’s decline, the big European banks had finished the day in red, causing the stock markets to fall. Paris lost 1.74%, Frankfurt 1.66%, and London 1.26%. Investors are skeptical, and the collapse of the US Silicon Valley Bank and the rescue of Credit Suisse remain too present in their minds.
Chancellor Olaf Scholz, European Central Bank President Christine Lagarde, and French President Emanuel Macron have called for calm, but with little success. The German Institute of Economics advises against rescue operations such as those in the 2008 crisis, ensuring that the situation is not the same while warning that it is necessary to monitor whether banks continue to have sufficient capital of their own.
The fear and nerves are understandable, given the history of the financial crisis of 2008. However, it’s essential to remain calm and analyze the situation. The banks must continue to have sufficient capital of their own, and rescue operations should only be a last resort. The markets will recover, and stability will return in time.