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The Downsizing Of Deutsche Bank

Major changes are afoot at Deutsche Bank, which weathered the 2008 economic storm but has been slow since then to adapt to changes in global financial markets.

A Deutsche Bank building
A Deutsche Bank building
Nikolaus Piper

FRANKFURT — Deutsche Bank has taken a series of radical restructuring measures that have everything to do with events from seven years ago, when the collapse of New York-based bank Lehman Brothers ignited the global financial crisis.

Deutsche Bank survived the crisis more or less intact. But the relative success it enjoyed under CEO Josef Ackermann between 2002 and 2012 may have blinded the German bank to the ways financial markets changed after the 2008 crash. This seems to be the only plausible explanation for problems that have beset the Frankfurt bank since then.

Current co-CEOs Anshu Jain and Juergen Fitschen are now having to play catch up, to adopt lessons that should have been learned years ago. As such, they decided to sell the Postbank subsidiary and minimize the remainder of the banking institute. The absolutely atrocious stock price leaves them with no other choice.

Two things changed because of the financial crisis. Pestered by an angry populace, politicians and financial regulators made it clear that they were serious about controlling the banking sector's movements. They signaled an unwillingness to spend billions in taxpayer revenue to save the world's financial system a second time around.

For that reason, banks are now required to hold more in equity funds to secure their businesses. This is costing the banks a substantial amount of their profits. Furthermore, the new equity fund laws have been justifiably constructed in such a way that larger, international banking institutions are required to have larger equity funds than smaller banks.

Minimizing can therefore be beneficial. Which is why Deutsche Bank is not only selling its Postbank subsidiary but is also reducing the scope of its investment banking. This will ensure security, but it also means job losses.

No more tolerance

The attitude of the financial regulators has also changed, especially in countries with longstanding capital market traditions, such as the United States and Britain. These countries operate zero-tolerance policies when it comes to violation of laws and executive orders and tend to impose serious punishments.

For a long time bankers appeared not to take these regulatory bodies seriously, which helps to illustrate how significant Deutsche Bank's cultural reform really is. Adhering to the old financial culture resulted in a fine of 2.3 billion euros for manipulating interest rates during the London Libor scandal. The bank seems finally to be learning its lesson.

In Frankfurt, Deutsche Bank should also give high priority to the difficulties it's facing with the U.S. financial controller. The Federal Reserve has been negotiating with Deutsche Bank’s North American subsidiary because it finds its financial reports "of low quality and not reliable." Deutsche Bank even failed the second stress test due to a deficiency in reporting techniques. All of these problems could lead to an explosive mixture that might backfire on an institution that wants to remain at the international forefront of investment banking.

The second factor that has changed since the financial crisis are interest rates. The Federal Reserve and European Central Bank are flooding the markets with cheap money to stabilize the economy and prevent deflation. Those who want to save their money barely receive any interest and are sometimes even forced to pay.

With that in mind, Deutsche Bank apparently didn't see a future for its Postbank, whose main clientele are small-time savers and borrowers. So the Postbank subsidiary will be phased out after only seven years of being part of Deutsche Bank. Without this subsidiary, Deutsche Bank hopes it can adhere to the equity requirements regulators have imposed.

After its restructuring phase, Deutsche Bank will look exactly as it did before the financial crisis, only smaller, relatively speaking. It will be an investment bank that will also have a retail banking department for high-end clients. It's betting on its ability to outperform the competition in certain areas. The success of this strategy will depend on whether the financial culture change in investment banking that Jain and Fitschen talk so much about is truly happening.

Meanwhile, the German banking sector as a whole still has some major issues to resolve. There may be a healthy number of Volksbanken and Sparkassen on a local level, but the larger banks still face difficulties. Because of the post-crash bailout, Commerzbank, for example, is still partially state-owned. The regional banks may be in even deeper trouble. And with the employees of the only German bank of international standing fighting among themselves, there's really nowhere else to turn.

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What's Spoiling The Kids: The Big Tech v. Bad Parenting Debate

Without an extended family network, modern parents have sought to raise happy kids in a "hostile" world. It's a tall order, when youngsters absorb the fears (and devices) around them like a sponge.

Image of a kid wearing a blue striped sweater, using an ipad.

Children exposed to technology at a very young age are prominent today.

Julián de Zubiría Samper


BOGOTÁ — A 2021 report from the United States (the Youth Risk Behavior Survey) found that 42% of the country's high-school students persistently felt sad and 22% had thought about suicide. In other words, almost half of the country's young people are living in despair and a fifth of them have thought about killing themselves.

Such chilling figures are unprecedented in history. Many have suggested that this might be the result of the COVID-19 pandemic, but sadly, we can see depression has deeper causes, and the pandemic merely illustrated its complexity.

I have written before on possible links between severe depression and the time young people spend on social media. But this is just one aspect of the problem. Today, young people suffer frequent and intense emotional crises, and not just for all the hours spent staring at a screen. Another, possibly more important cause may lie in changes to the family composition and authority patterns at home.

Firstly: Families today have fewer members, who communicate less among themselves.

Young people marry at a later age, have fewer children and many opt for personal projects and pets instead of having children. Families are more diverse and flexible. In many countries, the number of children per woman is close to or less than one (Singapore, Taiwan, South Korea, Hong Kong among others).

In Colombia, women have on average 1.9 children, compared to 7.6 in 1970. Worldwide, women aged 15 to 49 years have on average 2.4 children, or half the average figure for 1970. The changes are much more pronounced in cities and among middle and upper-income groups.

Of further concern today is the decline in communication time at home, notably between parents and children. This is difficult to quantify, but reasons may include fewer household members, pervasive use of screens, mothers going to work, microwave ovens that have eliminated family cooking and meals and, thanks to new technologies, an increase in time spent on work, even at home. Our society is addicted to work and devotes little time to minors.

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