Deutsche Bank plans to cut balance sheet

It aims to trim the balance sheet by 20 per cent.

New Statesman
Deutsche Bank. Credit: Getty Images.

Deutsche Bank intends to trim its balance sheet by 20 per cent to €1trn so that it can comply with stringent Basel III standards that require banks to use more of equity capital for their financial health.

It plans to cut the balance sheet by the end of 2015, reports The Financial Times.

It aims to achieve a minimum of alteast 3 per cent equity to loans ratio over the next two and a half years and this plan may be announced during the second quarter results.

The plans also comprise new rules for derivatives accounting, slashing the pile of cash of €240bn and reducing €90bn assets in its non-core business operations, the report added.

As of 31 March, the bank’s ratio of equity to assets was at 2.1 per cent, which is the second lowest out of 18 banks rated by analysts of Morgan Stanley.

Though banks opine that equity is a costliest way of funding their operations, from the perspective of  regulators, it is ideal as the shareholders and not the taxpayers would be the first to lose money when  banks become bankrupt.