Global rating agencies are not exhibiting enthusiasm for Deutsche Bank's restructuring plan. I certainly am not. The perennially troubled bank needs to show credible restructuring, risk management, and liquidity plans, as well as raise capital to sustain unexpected losses.
Global credit ratings do not seem to be excited about Deutsche Bank's restructuring plans. I am not. GettyDeutsche Bank’s weekend announcement that is essentially closing its global equity sales and trading businesses and significantly reducing interest rate products has not been met with optimism by global rating agencies. As soon as Deutsche Bank announced that it will lay-off 18,000 employees in Australia, Hong-Kong, India, UK, and the U.S, global rating agencies weighed in.
Ratings are very important, not only if Deutsche Bank wants to issue debt or borrow money from financial institutions, but also because they affect the level of collateral Deutsche has to post for transactions such as derivatives. Fitch has its rating Outlook on Deutsche Bank as ‘Evolving.’ This means that Fitch’s rating could move in either direction over a one-to-two-year horizon. Just a month ago, Fitch Ratings downgraded Deutsche Bank’s long-term Issuer Default Rating to 'BBB', the Viability Rating to 'bbb' and the Derivative Counterparty Rating to 'BBB+'. At that time, Fitch’s outlook was changed to ‘evolving’ from ‘negative’.
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