Regulators Urge Deutsche Bank To Merge With European Rival (To Spread The Pain) | WHAT REALLY HAPPENED


Regulators Urge Deutsche Bank To Merge With European Rival (To Spread The Pain)

Throwing a monkey wrench in rumored plans to merge Germany's two biggest banks, Bloomberg reports that Germany's financial regulators would prefer for Deutsche Bank to merge with a European rival rather than local, and just as troubled, competitor Commerzbank, setting them apart from forces in the government keen on an all-German deal.

According to Bloomberg, the ECB is favoring a cross-border combination to drive integration in the region’s financial markets, while analysis by German regulator BaFin suggests a preference for a European deal because the two domestic banks - surprise - are currently too weak to benefit sufficiently from a merger.

In other words, merging one Too Big To Fail bank with another would only result in a teetering behemoth that will need an even greater bailout when the next financial crisis hits. And by "sharing" the combined liabilities of the combined entity - which would likely inherit Deutsche Bank's tens of trillions in gross notional derivatives - with another sovereign, would at least ensure that German taxpayers would enjoy some dilution of the upcoming bailout pain with another European nation at some point in the coming years.

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