Bad debts could crush even major banks such as Deutsche Bank

banks

Banks are now facing difficult times. While some have not recovered from the last crisis, there is already a new one around the corner.

Let’s see how the banks performed during the pandemic and what this may mean for them in the future.

Problems are starting to pile

The pandemic is still raging around the globe, and it doesn’t look like the situation is going to improve any time soon. The pandemic has affected many sectors and now there is no certainty about their future.

Among the sectors affected is also the banking sector. The pandemic has hit banks so hard that their losses are in tens of percent. Banks lent capital at high risk in an effort to keep the economy afloat. At the same time, they were under enormous pressure as businesses were closing and their owners could not repay their loans.

Crisis of 2008

Yet many banks were not yet able to recover from the previous crisis from years 2008 and 2009, caused by the fall of Lehman Brothers bank. Maybe some of you still remember, what happened.

Banks were lending away money they did not have almost to anybody. These toxic loans were then turned into financial instruemtns and went around again. And again. When it crashed, many banks at that time were saved by interventions of central banks, which bought these bad loans from the market.

Deutsche Bank

Among these banks is also giant like Deutsche Bank, one of the largest European banks. If the markets worked according to the economic theories, it should have fallen already. Before COVID-19 pandemic the bank had serious problems, it had to lay off 18 000 employees and pay them 120 mld. EUR compensations in the 2019. There are rumours that people are fleeing from the bank and taking their investments elsewhere, the sum is reaching 1 mld. EUR per day.

Losses of up to tens of percent and global problems

However the overall market sentiment is still positive despite significant losses. The shares of banks are very strong. Due to the problems that banks around the world have had, the banking sector has changed a lot. People’s interest in loans has fallen and banks are trying to keep the economy at the cost of higher inflation. Stimulus assets have averted the liquidity crisis, but underlying problems persist.

Conclusion

Ask yourself, if you want to give your money to such a system? Isn’t it better to be independent of any bank and manage your own finances?

Sources: beincrypto.com, Finex.cz

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