Deutsche Bank and the Road to Basel III
Deutsche Bank made its entrance into the world in 1870 and it was one of the first banks to adopt universal banking as it promoted and facilitated trade relations between Germany and other overseas markets. Deutsche Bank acquired smaller banks in Germany in order to be the most prominent bank in their home base in addition to having a global reach. Following World War I, inflation took over Germany causing many borrowers to default on their loans forcing the bank to sell most of its assets in order to stay alive (however that diminished their global presence). The bank’s involvement during World War II with the transferring of the Jewish customers holdings to the German Government led to the Allied forces disbanding the bank into 10 different banks. Before Deutsche bank separated; they were focused on traditional banking that operated in commercial and retail banking. Ten years later through mergers of former parts of the bank, Deutsche Bank was reestablished. By 1958 the bank began to gain its foothold in the global market again by acquiring major banks in Italy, Spain, the United Kingdom, and the United States. By 2001 Deutsche was present in 70 countries and listed on the NYSE. In addition, to becoming a global bank again, they had shifted their business focus from traditional retail banking toward global investment banking. The goal was to become a “one-stop shop”, that way a customer can come to the bank for all their financial needs. The reasoning behind their strategy was good because this way they are expanding into new markets, making Deutsche Bank an option for more customers, and also providing more services to existing customers. The shift into investment banking led to extreme growth that required increased leverage to cover its costs and came with a great degree of risk. The debt Deutsche Bank took on allowed them to generate greater profits, but also left them financially stressed with the...
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