Will Deutsche Bank be the Next to Fall? Worried Investors Are Already Turning to Gold
After Silicon Valley Bank became the second-largest bank of all time to fail, investors and analysts across the world have been sounding alarm bells. Some fear that the entire banking system is still at risk, but many think that the Treasury Department’s decision to bail out depositors was enough to solve the problem.
The crisis raised concerns about the stability of all major banks, but Deutsche Bank, one of the world's largest and most scrutinized financial institutions, is worrying investors more than others. Deutsche Bank was already not in the best shape when the recent banking crisis started.
The German banking giant has faced numerous challenges in recent years, with its stock price dropping about 30% in less than two months. Despite a small recent rebound, investors remain skeptical about the bank's future prospects. Moreover, Deutsche Bank's interconnectedness with other financial institutions heightens the potential for a domino effect should it run into major liquidity issues.
Deutsche Bank has been struggling to regain its footing amid various scandals over the past few years. The worst of the recent scandals was its ties with Jeffery Epstein and its failure to prevent his millions of dollars of suspicious transactions, despite knowing his criminal history and playing a major role in his financial dealings.
The bank received a $150 million fine from the New York Department of Financial Services for the Epstein scandal along with a separate failure to detect money laundering from two European banks it was working closely with. The Federal Reserve has also warned Deutsche Bank multiple times that its methods of preventing money laundering in the U.S. are insufficient. Deutsche Bank says that it is addressing these issues, but it will likely be a long road to recovery and it’s unclear whether the effort will succeed.
Investors are worried about the bank's vulnerability to external shocks, such as more bank runs or a continuously hawkish Fed. The global financial system is closely watching Deutsche Bank's situation, as its failure could have far-reaching consequences. Regulators and policymakers are keeping a close eye on the institution to prevent a potential worldwide crisis.
Even if the bailout killed this particular contagion, if nothing changes in the U.S.’s banking regulation or oversight, there is no reason why this situation couldn’t happen again. Americans are growing increasingly distrustful of large banks and financial institutions. After the housing crisis in 2008, the Gamestop short squeeze in 2021, the exponential rise of digital currencies designed to circumvent banks and the current banking crisis, large banks are seen as little more than enemies by many.
With trust in banks plummeting, investors are looking to protect their portfolios with gold and silver. Gold and silver prices shot up after news of Silicon Valley Bank’s predicament was unearthed. One of the best things about investing in gold and silver is that you don’t need to trust anyone. You can keep it in your safe at home and not worry about losing it all because your bank screwed up. Precious metals are also some of the only assets that have been highly valued across the world for thousands of years.
Investors are turning to gold and silver in droves to protect their portfolios as uncertainty rises in the economy. Check out Benzinga’s Precious Metals Hub to master the sector and discover the best precious metals trading platforms.
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