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Shares in Deutsche Bank fell sharply Friday, dragging down major European banks and leading German Chancellor Olaf Scholz to express confidence in the solidity of the country’s largest lender as fears about the global financial system sent fresh shudders through the markets.
Deutsche Bank shares tumbled 10.9% in early afternoon trading on the German stock exchange. It follows a steep rise in the cost to insure bondholders against the bank defaulting on its debts, known as credit default swaps.
Rising costs on insuring debt were also a prelude to a government-backed takeover of Swiss lender Credit Suisse by its rival UBS.
The hastily arranged Credit Suisse-UBS marriage Sunday aimed to stem the upheaval in the global financial system after the collapse of two U.S. banks and jitters about long-running troubles at Credit Suisse led shares of Switzerland’s second-largest bank to tank and customers to pull out their money last week.
“There is no reason to worry,” Scholz said, responding to a reporter who asked whether Deutsche Bank could be the next Credit Suisse.
“Deutsche Bank has thoroughly modernized and reorganized its business and is a very profitable bank,” said Scholz, speaking after a European Union summit in Brussels.
The German lender has capital reserves well in excess of regulatory requirements and saw 10 straight quarters of profits.
