Thread by @aimoneale

Mini #DB thread on why a lot of headlines on #Deutsche posing more of a systemic risk following this weekend's announcement are mostly overdone. 1/8

First, the German lender posted lower amounts for 10 of the 12 indicators used to designate G-Sibs at end-2018 compared to 2017.

risk.net/risk-quantum/6… 2/8

And while we need to wait for the Basel Committee to release their aggregate systemic risk indicators in November to identify the actual G-Sib surcharge reduction, it's highly likely Deutsche will drop into the 1.5% bucket, compared with the 2% bucket it belongs to today. 3/8

Second, focusing on the amount of Deutsche's derivatives exposure is another example of lazy headlines doing the rounds today. The FT did a good job by highlighting the difference between notional amounts and market value, so kudos to @ajb_powell.

ftalphaville.ft.com/2019/07/08/156… 4/8

But even when looking at swap notionals (one of the 12 metrics used to asses how systemically risky a bank is), Deutsche cut the most in € terms of all eurozone G-Sibs in 2018, eliminating €6.6trn (16%) of notionals.

risk.net/risk-quantum/6… 5/8

Lastly, Deutsche cut its level of interconnectedness with other financial institutions last year, slashing intra-financial system assets by €50 billion (22%) and liabilities by €80 billion (29%) compared to 2017.

risk.net/risk-quantum/6… 6/8

The "interconnectedness" category captures transactions with other financial institutions, including loans, debt and equity securities, securities-financing transactions and derivatives. Hence, a bank with fewer links = a less risky bank for the whole financial system. 7/8

So while the overall situation is far from being rosy for investors and employees alike, there's no reasons to freak out. Yet. 8/8