China’s Predatory Lending
February 12, 2025
The rise of behavioral finance has led to several new strategies being floated in the financial world. Contrarian investing is one such strategy. This strategy did not exist till most of the world followed the traditional cash flow based financial models. However, ever since behavioral finance has come to the fore, so has contrarian investing. […]
From the past few articles, it may seem like capital budgeting has a pre-determined procedure. All the possible scenarios that can occur have been thought of and appropriate solutions for all of them have already been developed. While this makes “capital budgeting” a good subject, it also removes the creativity from it. There is a […]
Exotic Innovations or Weapons of Mass Destruction ? Anybody who has followed the severe and protracted financial crises of the last Eight years would be aware of the damaging role played by Exotic Financial Products such as Derivates, Swaps, Credit Default Swaps, and Options. These instruments that are supposedly in place to hedge against risk […]
In the previous article, we have already seen that sponsorship is one of the predominant ways in which a sports league can generate revenues. However, it is important to note that sponsorships can happen at various levels. For instance, sponsorship can be given to an individual, a team, or even an entire sports league. In […]
Commercial banking is fundamentally different from retail banking in several ways. One of the main differences between the two types of banking is the relationship management approach. The commercial banking system relies heavily on relationship management. Each and every corporate customer of a commercial bank has a dedicated relationship manager. This is possible because of […]
Deutsche Bank which, which was once a dominant German financial institution has now become extremely fragile. This German bank managed to make it past the great recession of 2009. However, the bank has been facing one challenge after another ever since the recession got over. At the present moment, the bank is functional and solvent. However, the German government is afraid that if the economy faces any shock or even if Deutsche bank has to pay a big fine, it will simply collapse. The German government is not very comfortable with this situation. Deutsche Bank is one of their central financial institutions and financial troubles at Deutsche Bank could endanger the fledgling export-led German economy. This is the reason why the German government is eager to merge the Deutsche bank with Commerzbank.
However, the merger process hasn’t been a smooth ride either. The government is facing stiff resistance from employees at these institutions. In this article, we will have a closer look at this proposed merger as well as the possible after-effects.
The German government has made it very clear that it wants to keep the financing of German small and medium enterprises in German hands. This is the reason why it wants Deutsche Bank to merge with Commerzbank. Commerzbank, like Deutsche Bank, was under severe financial stress after the 2009 crisis. The bank would not have survived had it not been for the bailout by the German government. Also, Commerzbank itself has gone through several mergers. Hence, it has the required experience to manage a merger of this magnitude.
At the present moment, the German government has a 15% equity stake in Commerzbank. Also, it fears that Commerzbank is also volatile and hence is a likely target for a hostile takeover bid by a foreign bank. The German government, therefore, sees Deutsche Bank and Commerzbank as two entities which have complementary needs. If left alone, both the entities are likely to collapse. However, if merged together, the combined entities will have the financial wherewithal to survive grave financial distress.
The merger of Deutsche Bank and Commerzbank would result in many advantages. Some of them have been listed below.
There are many problems and issues which may arise once the Commerzbank, Deutsche Bank merger takes place. Some of these problems have been written below:
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