Deutsche Bank invests only 19% of its resources into loans to the real economy. More than half of its assets are on the hunt for short-term profits every day. This is evidenced through an analysis by FairFin of the financial statements of seven banks active in Belgium. Of the banks researched, only Triodos and, to a lesser extent, Argenta, hold themselves substantially to the traditional role of a bank: using savings to invest in the real economy. FairFin believes this is unacceptable at a time when there are so many social needs.
Bank as Usual
After the largest financial crisis since the thirties, little has fundamentally changed in the banking sector. Dramatic consequences to the economic system were averted by pumping billions of tax dollars into the banking sector. The irony is that, like in the thirties, this rescue operation makes a turnaround of the financial system unnecessary. Thus, high-risk banking models still stand tall.
Megabanks are Letting Go of the Real Economy
The research paper “A bank in reverse: to what extent is the Belgian banking sector operating in the real economy?” shows that most megabanks in Belgium, especially BNP Paribas and Deutsche Bank, still see no salvation in a traditional banker’s role. By the way, they themselves don’t pull any punches about this. “The banks themselves point out that assets in their so-called trading portfolio are aimed at the rapid buying and selling on financial markets,” said researcher Greg Van Elsen.
In good times, trading produces speculative short-term profits, big bonuses, and rising rates. But when self-serving gambling suddenly goes awry, society pays the price. In that context, it is distressing that even today, trading is still the main activity of some banks. Lending to individuals and businesses that stimulate the real economy clearly does not prevail.
Furthermore, it is appalling that the deposits of patient savers barely amount to one-quarter of the total funding of BNP Paribas and Deutsche Bank. Such banks therefore still rely to a large extent on volatile financial cash flows from other financial institutions to satisfy their speculative appetite. The fact that this practice tends to create dangerous bank-interdependence became painfully true in the recent crisis.
A Bank in Reverse
FairFin supports banks that focus on their traditional roles: attracting savings and funding social needs by lending to the real economy. Today, it is unacceptable that some banks still hold to a banking model that has, by now, well-established dangers. To that end, FairFin would like to encourage savers to place their deposits into banks that commit themselves to the real economy in the first place.
Read the full report (en)