Deutsche Bank AG is the riskiest financial institution in the world as a potential source of external shocks to the financial system, according to the International Monetary Fund.
 
“Among the G-SIBs (globally systemically important banks), Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse” the IMF said in its Financial Sector Assessment Program.
 
“The relative importance of Deutsche Bank underscores the importance of risk management, intense supervision of G-SIBs and the close monitoring of their cross-border exposures, as well as rapidly completing capacity to implement the new resolution regime” the report read.
 
The IMF assessment was not the only bad news for Deutsche Bank; The United States Federal Reserve said on ThursdayU.S. units of Deutsche Bank and Spain’s Banco Santander SA were the only ones among 33 banks that failed the final round of its “stress test”, conducted to gauge how they would fare in a new financial crisis.
 
The IMF also said the German banking system poses a higher degree of possible outward contagion compared with the risks it poses internally.
 
“Network analysis suggests a higher degree of outward spillovers from the German banking sector than inward spillovers. In particular, Germany, France, the U.K. and the U.S. have the highest degree of outward spillovers as measured by the average percentage of capital loss of other banking systems due to banking sector shock in the source country.”, the IMF added.
 
The IMF concluded that Germany needs to urgently examine whether its bank resolution plans are operable and whether authorities can ensure control over a bank if resolution actions take a few days, if needed, by imposing a moratorium:
 
“Operationalization of resolution plans and ensuring funding of a bank in resolution is a high priority. The authorities have identified operational challenges (e.g., the timely valuation of assets to be transferred, continued access to financial market infrastructures) and are working to surmount them. In some cases, actions to effect resolution may require a number of days to implement, and the authorities should ensure they can maintain control over the bank during this period, including by using their powers to impose a more general moratorium for a specific bank”, the IMF said.
 
A Deutsche Bank spokesman declined to comment on the IMF assessment.​