The share prices of Germany's biggest lender Deutsche Bank (DB) plunged on Friday as concerns about the health of European banks are mounting in the wake of the collapse of banks in the United States.

Edited by | Adam Lurkade
Economy section
26 March 2023 - FRANKFURT -Xinhua

      DB topped the list of companies that suffered the sharpest decline of their shares on the German stock exchange (Deutsche Boerse), down 8.53 percent at closing on Friday. The share price of Commerzbank AG, the second-largest bank in Germany, dropped 5.45 percent.

DB has lost some 30 percent of its market value since the onset of worries about the banking sector sparked by the shutdown of the U.S. Silicon Valley Bank about two weeks ago.

There is still no sign that investors' nervousness about European banks is abating. The slump of share prices of DB and Commerzbank is believed to be triggered by the skyrocketing prices of their Credit Default Swap (CDS), a form of insurance put on bonds against credit default events.

Local German press quoted S&P Market Intelligence as saying that more than 200,000 euros (215,120 U.S. dollars) had to be paid over the course of a 10 million euro package of Deutsche Bank bonds instead of 142,000 euros as of Wednesday. The sudden and precipitous rise in CDS price is a sign that investors' concern about the default risks of DB bonds is mounting.

German Chancellor Olaf Scholz dismissed the concern about the health of DB on Friday. He said at a summit of European Union (EU) leaders in Brussels that there is no reason to worry as DB has fundamentally modernized and reorganized its business model and is a very profitable bank.

The European Central Bank claimed at the beginning of this month that it is keeping a close eye on the situation of the banking industry and its toolkit is fully equipped to provide liquidity support to the eurozone financial system. ■

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