As the sovereign debt crisis in Europe starts to spill over into the banking sector, US clients of foreign banks have begun to worry.
On December 14, the Financial Times reported, “Foreign owned banks operating in the US have suffered their largest six month fall in deposits on record in what some analysts have described as a ‘flight to safety’ from European banks to domestic institutions.” According to Wells Fargo banking analyst, Matt Burnell, “We have heard of a lot of US companies that were doing business with non-US banks looking at the news, and saying I want to be somewhere safer.”
Deutsche Bank’s main US deposit bank was part of this development. According FDIC data, reported by FT, “Deposits at Deutsche Bank’s Americas Trust Company fell by $2.1bn or 6.8 per cent during the third quarter.”
Deutsche Bank Trust Company Americas depositors may be especially concerned because DBTCA is a subsidiary of Taunus Corporation, Deutsche Bank’s top tier US bank holding company. Normally, bank holding companies are supposed to serve as a “source of strength” for their deposit taking subsidiaries. But as Simon Johnson and others have pointed out, Taunus has been operating with negative Tier 1 capital. If Deutsche Bank does not recapitalize Taunus, how will the latter be able to provide the capital buffer to DBTCA?
Are you a DBTCA customer? Are you concerned about the negative Tier 1 capital at DBTCA’s parent holding company?