Deutsche Bank Will Shoot Itself In The Foot To Avoid Giving International Regulators The Pleasure


Nobody can boost their leverage ratio with steely determination and cold efficiency like a German.

Deutsche Bank plans to increase its so-called leverage ratio, which measures the capital base against total assets, to 3% by 2015, by shedding assets and retaining earnings, according to people familiar with the matter.

The bank is required to meet the target by 2018. Most analysts put Deutsche Bank's current leverage ratio at around 2%, one of the lowest among major banks. A lower leverage ratio would generally indicate the bank has too many assets and not enough capital in case something goes wrong….

"When a bank says, 'We can shed €300 billion [$394 billion] plus of assets,' the question you have to ask yourself is, why have you got those assets on the balance sheet in the first place," said Christopher Wheeler, a London-based bank analyst with Mediobanca.

"It is going to be detrimental to earnings. You just can't avoid that," he added….

Thomas Hoenig, vice chairman of the Federal Deposit Insurance Corp. in the U.S., called the bank "horribly undercapitalized" in an interview with Reuters last month, citing the leverage ratio. "They have no margin of error."

Deutsche Speeds Up Plan to Shrink Size [WSJ]