Deutsche Bank shares slumped on Friday, putting the health of another globally systemic important bank in the spotlight heading into the weekend, MarketWatch reported.
The German lender’s shares fell 8 per cent in Frankfurt trade, and the Euro Stoxx bank index fell 4 per cent.
Deutsche Bank’s 5-year credit-default swaps widened on Thursday. It should be noted that Deutsche Bank’s 5-year credit-default swap, which was 175 on Thursday, is nowhere near the peak for Credit Suisse, which was 1,194, according to S&P Global data.
The higher the value of the CDS, the more likely the market sees the issuer defaulting, MarketWatch reported.
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Deutsche Bank’s AT1 bonds have tumbled in value after Switzerland wiped out Credit Suisse’s securities in the deal for it to be taken over by UBS.
Invesco AT1 Capital Bond UCITS ETF, which invests in these convertible bonds, have dropped 18 per cent this month as investors lose faith in the securities. European and other banking regulators across the globe have insisted they will not follow Switzerland’s precedent, and first let bank equity fall to zero before wiping out the convertible securities in the event of a failure, MarketWatch reported.
UBS also is feeling the stress in a deal that the banks say might not complete this year. UBS shares dropped 5 per cent.