Now the giant Deutsche Bank collapses and revives fears of the financial crisis in Europe

The first German bank and one of the first in Europe, the The German giant Deutsche Bankhad this Friday, a black day.

at European noon its shares are down 12% on the Frankfurt Stock Exchange after losing 14%.

The bank has been one of the most targeted by the failure of Silicon Valley Bank in the United States and especially since last week the Swiss government forced UBS to buy Credit Suisse, a deal between the two largest Swiss banks that caused financial tremors in Europe.

While European leaders, with the presence of European Central Bank President Christine Lagarde, discussed in Brussels at a previously scheduled summit on the competitiveness of the bloc’s economy in the face of massive US and Chinese subsidies and on issues such as the war in Ukraine or migrations, Deutsche Bank was giving alarming signals.

will come out of the top a message of calm to the markets financial institutions, but do not seem to have clear ideas on the situation of many subjects in the light of the stock market performance of Deutsche Bank.

Why does it fall?

The drop this Friday is due to increase in the cost of insurance against the risk of default from the German giant. An increase in those insurance means that the markets they see an increase in the likelihood of such a default.

Nobody really expects the bank to fail because both the German government and the European Union They have mechanisms to keep it afloatalthough its size would also challenge German coffers.

The bad news for the German government is that the second largest European bank that fell the most this Friday was Germany’s second largest bank. the Commerzbank.

Shortly after noon in Europe, the continent’s stock markets were falling, but the fall was relatively minor.

​ Frankfurt, Paris, London, Milan and Madrid lost around 2%. The banking sector lost the most. Its leading index, the Stoxx Europe 600, fell 5% as this increase in the cost of default insurance was experienced by other European banks, though none at the level of Deutsche Bank.

The lessons of 2008

The financial crisis that broke out in 2008 has left lessons, for example that the increase in the price of these insurances was one of the best indicators to measure fear from the financial markets to the banking reality.

Under these instruments, Deutsche Bank has a probability of default 27.4% over the next five years. Similar-sized rivals like UK-based Barclays and Société Générale have hovered between 10% and 15% in recent weeks.

While waiting for the message to come out of the European summit, the president of the supervisory branch of the European Central Bank, the Italian Andrea Eria, said on Friday that the European banks are solidthat they have sufficient liquidity reserves and that depositors have no doubts about their soundness.

ap