Deutsche Bank loses top rating
Tuesday 24 December 1996
The move by Moody's, the New York credit rating agency, means that only a handful of banks are still ranked in the financial world's premier league of creditworthiness and two of them - Union Bank of Switzerland and Dresdner Bank - are under review for a downgrade.
Analysts in London said the Deutsche downgrade was a fitting end to a dreadful year for the bank.
Deutsche will end up with a bill for more than pounds 400m for the fiasco at Morgan Grenfell where Peter Young, a former star fund manager, broke rules laid down by City regulators.
Mr Young, under investigation by the Serious Fraud Office, set up a web of Luxembourg holding companies to hide the extent of his investments in high technology stocks. Deutsche is compensating 90,000 investors in three affected funds.
Moody's cut Deutsche's long-term debt, counterparty and deposit ratings from triple A to Aa1.
The agency confirmed the bank's Prime-1 rating for short-term deposits and commercial paper but cut the long-term rating and counterparty rating of Morgan Grenfell & Co to Aa2 from Aa1.
Deutsche played down the significance of the downgrade. "We are convinced that the new evaluation will not lead to a lasting rise in refinancing costs," said a spokesman.
But the bank's shares slipped in the last few minutes of trade on the Frankfurt stock exchange to close at DM70.59, down DM0.56.
Linda Montag, senior analyst at Moody's, said the Morgan Grenfell scandal was not the direct reason for the downgrade.
"But [it's] one of the examples of the risks of the bank's global expansion," she said.
The changing dynamics of Germany's fragmented banking market and fierce competition in global markets in which the bank was expanding, such as investment banking, added uncertainty to the bank's fundamentals, Ms Montag said.
However, Moody's still believes Deutsche is "one of the world's strongest and better managed financial institutions".
- 1 Game of Thrones season 6: Jon Snow theorists believe Ned Stark's son may have a twin sister
- 2 Artist takes LSD, draws herself over different stages of the 9-hour trip to show its effects
- 4 iPhone 6s camera: features to include 4K video camera and flash for selfies
- 5 A pint of water every day is the key to losing weight, scientists say
Miley Cyrus address Robin Thicke VMA controversy: ‘He wanted me as naked as possible, but I got the heat because I’m a woman’
Most expensive city to live in for expatriates: Luanda, Angola takes number one spot with Hong Kong and Zurich in top three
Irish tourist filmed fighting with shopkeepers in Turkey says they 'messed with the wrong man'
House of Lords: Outcry as donors, fixers and MPs caught up in expenses scandal get peerages
Moody neurotics are more likely to be creative geniuses, study says
Dresden riots: Protesters in Germany attack refugee buses shouting 'foreigners out'
France train shooting: US soldiers speak of the moment they stopped gunman and 'beat him until he was unconscious'
Labour leadership: Jeremy Corbyn accused of 'deluding' young supporters with 'claptrap'
'Women only' train carriages: Jeremy Corbyn unveils radical move to tackle public harassment
Black holes are a passage to another universe, says Stephen Hawking
Iain Duncan Smith 'should resign over disability benefit death figures', says Jeremy Corbyn
iJobs Money & Business
£25000 - £30000 per annum: Recruitment Genius: From modest beginnings the comp...
£35000 - £40000 per annum: Recruitment Genius: From modest beginnings the comp...
£15000 - £65000 per annum: Recruitment Genius: This is an exciting opportunity...
£18000 - £20000 per annum: Recruitment Genius: This is a fantastic opportunity...