European Central Bank asks Deutsche Bank to gauge investment banking exit costs

Deutsche Bank has been asked by European Central Bank supervisors to calculate the potential costs of winding down its investment banking operations, a source told Reuters.

Germany’s biggest lender has been calculating the financial effects of a potential move to quit investment banking for some time, and the move is not related to the switch in Deutsche Bank’s top management position when retail banking expert Christian Sewing was appointed to replace chief executive John Cryan.

The point of the exercise is to estimate how the value of Deutsche Bank’s capital market and derivatives business would develop if the bank was to exit abruptly from new business, the source said on condition he not be named because the matter is confidential.

Deutsche Bank said it “routinely” calculates the consequences of an orderly winding-down of positions in trading books for regulators. The ECB declined comment.

Germany’s daily newspaper Sueddeutsche Zeitung was first to report on Deutsche Bank’s explorations induced by the ECB, saying other lenders are to face similar requests at a later stage.

Deutsche Bank is already in the middle of a global review of the investment bank, known internally as Project Colombo, to determine the way forward as revenues shrink and clients and staff leave.

Re-disseminated by The Asian Banker from Reuters

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