Does the exit of Deutsche Bank mean that the investment bank is a liability? – Quartz



[ad_1]

How many investment banks, that is too many investment banks?

This week, Deutsche Bank has begun a major decline in its activity. The largest bank in Germany cuts one-fifth of its workforce – about 18,000 jobs – and reduces its investment banking and trading activities. Its most "radical" restructuring, but it will focus on stronger banking for mainly European customers.

The company based in Frankfurt, Germany, gets all the attention, but it's no exception. Every major bank has been profoundly rethought since 2008. That year, several major companies in Manhattan were engulfed by other banks and Lehman Brothers collapsed. The Royal Bank of Scotland fell from the sky shortly after. In the United States and Europe, the government watchdogs who pulled the financial system from the brink then set out to build a safer and more stable financial sector.

They have largely succeeded. This means that risky things like buying and selling securities are no longer the people in charge. Goldman Sachs, known for his commercial prowess, has embarked on retail banking. Morgan Stanley, his arch-nemesis, then turned to wealth management, a move that paid off (paywall). UBS and Credit Suisse have reduced their investment banks, just like RBS in the UK, and Nomura in Japan has stumbled outside of its domestic market.

The five major US banks, including JPMorgan, Bank of America and Citigroup, are on top of what's left, but that's not quite it. Francesc Rodriguez All, a finance professor at the Cass Business School in London, thinks that they still face intense competition, but often from non-more agile banks. Automated high-frequency trading companies are pushing further in their field, as well as specialized investment banks. Startups peck at their feet and major technologies like Facebook revolve around.

So, is the investment bank in danger? Not enough. There is still much to be gained in finance, and members of this smaller group of mostly US mega-banks are still too big to fail. But the revamp of Deutsche Bank is a recognition of the fact that the world has more room for so many big banks than it did, which other companies have been recognizing for years. If the trends of the last decade continue, their class could further decline.

[ad_2]

Source link