Deutsche Bank: The weakest link?
In 2011, a group of scientists at the Swiss Federal Institute of Technology in Zurich demonstrated that a tightly-knit group of 147 companies (in red in the network graph above, called "superconnected companies"), controlled a disproportionate amount of the total wealth. While this probably didn't surprise groups like Occupy Wall Street, the news went relatively under-reported and their implications barely mentioned by mainstream news agencies.
Guess who is in that list?
The team at the ETH Zurich further classified their list by order of influence that these companies hold. And today's "bad boy" of the financial world, Deutsche Bank, is the 12th most important company according to them.
Perhaps you have heard lately that something's going on, but let's recap what is happening:
- In 2015, Deutsche Bank posted a 6.8 billion EURO loss for the year.
- Earlier this month, Deutsche Bank confirmed that the U.S. Department of Justice demanded a 14 billion USD settlement for allegedly misselling mortgage-backed securities prior to the last economic crisis.
- The bank barely passed European stress tests in July.
- Shares of the bank have lost over 50% of their value this year.
- Over the weekend (as of the 27th of September) a report has been leaked that the German government will not be providing support for the bank, causing a drop of 7.54% of the share value in one day.
Why it matters?
As one of the main superconnected companies in the world, Deutsche Bank is tightly connected by a web of mutual ownership and revenue with the other 146 superconnected companies, creating a potential cascade effect. The term "too big to fail" does come to mind.
Still sceptical? The loss of confidence in the financial sector, following the leaked report last weekend, caused a 23 billion GBP loss on the FTSE within just one day.