The Deutsche Bank (DB) rumours are true but underestimated:
In June with, perhaps, an eye - and a towel ready to toss - on the sun loungers in Kefalonia, Milos and assorted other beautiful Greek islands that they technically own a bit of DB said that it would raise capital "for buying new earnings streams only".
All mostly to do with its purchase of Deutsche Postbank (effusive WSJ praise for which here); and last week the leaks of DB's €9 bn share sale duly began. Cept it is "at least €9.8 billion". Which is probably more than required for the remains of a target capped at under €6bn (even assuming additional capital injections poor stress tests pointed to in July).
Enter the Basel Committee on Banking Supervision. DB's press release appears to preempt the group's own announcement on higher banking capital requirements also due out today (whilst simultaneously justifying it - neat). You can bet in banking headquarters across the globe that Capital Raising Defcon condition is now flashing red as the competition for funds intensifies through year end.
The subplot is euro bank exposure to sovereign PIG bonds. Those stress tests, as a report last Friday from Lloyds points out, showed just half the exposure that the Bank for International Settlements estimates. The enormous difference is likely due to hedging on parts of the exposure using credit default swaps (CDS).
An excerpt from that Lloyds report:
No problem then - why on earth report gross when insured? On the other hand CDS, like other forms of insurance, can carry exclusions. Detail, schmetail.