Merkel faces bank dilemma

Her standing could be called into question if she bails out lender

GERMANY will not help ailing lenders such as Deutsche Bank, a senior lawmaker in Chancellor Angela Merkel’s conservative bloc said yesterday, as resistance grew to any possibility of staging a rescue.

With Merkel meeting European Central Bank chief Mario Draghi yesterday, Berlin has already flatly denied it is planning any repeat of the taxpayer-funded bailouts Germany and other Western countries mounted during the global financial crisis.

This followed a newspaper report earlier in the week the German government had made provisional plans to rescue Deutsche, which is fighting a fine of up to $14 billion from the US Department of Justice.

Concerns over the stability of Germany’s biggest bank pushed its shares to a record low on Tuesday. But Hans Michelbach, who heads the conservatives in the parliamentary financial committee, signalled he would oppose any support.

Referring to the state rescue of banks on the brink of collapse after the 2008 crisis, Michelbach told Deutschlandfunk radio: “I cannot imagine that the state will repeat something like that.”

A spokesman for the ECB declined to comment on the topics Merkel and Draghi discussed in Berlin yesterday.

“They are talking about the euro area economy,” he said.

Michelbach’s remarks indicate a reluctance among politicians to back a group disliked by many Germans because of its pursuit of investment banking abroad that resulted in billions of euros of penalties for wrongdoing.

As Germany prepares for national elections next year, Merkel’s popularity has sunk because of her open-door policy for migrants.

Were Deutsche Bank to require state help, her standing as the chancellor who successfully steered Germany through the financial crisis could also be called into question.

Earlier, Sahra Wagenknecht, a prominent member of the opposition far-left Linke party, blamed the government for putting “a ticking time bomb in the lap of the taxpayer”.

Norbert Spinrath, a lawmaker from the Social Democrats (SPD), the junior partners in Merkel’s coalition, struck a more conciliatory tone about Deutsche, an issue he said had been discussed informally in the “corridors” of the capital.

“The mood is composed,” he said. “We will have to figure it out.”

Deutsche is disputing US plans to impose the fine over the misselling of mortgage-backed securities.

The plunge in its shares has prompted speculation about who could help the bank were it to run short of funds. Deutsche was once one of Europe’s most successful players on Wall Street.

Like many of its peers, it has faced a series of lawsuits that often trace back to the boom years before the crash. Its litigation bill since 2012 has already hit more than €12 bn.

Claims filed by individuals, companies and regulators against Deutsche, outlined in the bank’s 2015 annual report, relate to misselling of subprime loans and alleged manipulation of foreign exchange rates or gold and silver prices. – Reuters

DEUTSCHE IS DISPUTING US PLANS OVER THE MISSELLING OF MORTGAGEBACKED SECURITIES