HOW TO THINK ABOUT IT

Too big not to fail. Two years ago, the International Monetary Fund tapped Deutsche Bank as the riskiest of the banks big enough to cause a major economic crash. But recently, there had been some encouraging signs: Last month, the bank passed a health test set by the Federal Reserve, one it’d failed in the past.

Competitive edge. In terms of investment banking revenue, the top five banks operating in Europe are all American institutions, and both politicians and banks in the EU have been calling for more mergers to create European giants that can compete. The EU’s largest bank, Spain’s Banco Santander, is about one-fourth the size of JPMorgan Chase. But Europe’s central bank has been slow to adapt, owing to concerns that banks that grow too big tend to fail … bringing financial systems down with them.

How did we get here? Many trace Deutsche Bank’s spectacular meltdown back 20 years, to its $10 billion takeover of American firm Bankers Trust, which gave it the largest assets of any bank in the world. That elevated the firm into the big leagues and led to nearly a decade of expansion, but the 2008 financial crisis and subsequent regulatory crackdown proved disastrous for Deutsche Bank, which has seen both profits and investor confidence collapse.

Personnel stories. Job cuts have affected the bank’s offices from Sydney to Mumbai to London, and the newly axed have been seen crying while exiting the company’s glittering offices. London, especially, is seeing huge cuts as it’s the hub of the investment banking arm, which is being pared back. That, combined with the banking exodus that's expected to accompany Brexit, could leave a lot of London bankers struggling to find work.

WHAT TO READ

Deutsche Bank’s Reboot Looks Real This Time, by Elisa Martinuzzi in Bloomberg
“Deutsche Bank has to convey both internally and externally that, this time, change means change. Accepting this hasn’t been easy. It involves the humility of giving up on a two-decade effort to be the Goldman Sachs Group Inc. of Europe.”

Deutsche Bank Shares Fall Sharply on Restructuring, by Jenny Strasburg and Paul J. Davies in The Wall Street Journal
“The efforts to peddle chunks of functioning operations reflect a stark turn for the European lender that for years has had the biggest global investment-banking ambitions.”

WHAT TO WATCH