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U.S. Money Funds’ Deutsche Bank Holdings at Lowest Since 2011

The 10 largest U.S. prime money market funds’ holdings of Deutsche Bank AG securities declined to the lowest in almost two years as Germany’s biggest bank cut its reliance on short-term financing.

The funds’ holdings fell to $10.5 billion at the end of April, down $3.2 billion from the previous month, according to a survey by Bloomberg Brief: Risk Newsletter. That’s the lowest since at least August 2011, when the survey began.

Some 9 percent of Deutsche Bank’s 1.1 trillion-euro ($1.4 trillion) funding base now comes from so-called discretionary wholesale funding sources, a category that includes money funds, down from 12 percent at the end of 2011, according to an April 29 presentation to shareholders by the Frankfurt-based lender. That day, the bank announced a 5 billion-euro plan to boost capital through debt and stock sales.

Deutsche Bank had 230 billion euros in liquidity reserves on March 31, according to its filings. Deutsche Bank spokesman Armin Niedermeier declined to comment.

Basel III liquidity rules make money funds less attractive funding sources for European banks seeking to back assets that are harder to sell. Under the rules, which European Union lawmakers agreed to implement in March, banks must only hold liquid assets against wholesale-funding liabilities with maturities of less than 30 days.

Decline Since 2010

For the U.S. funds surveyed, the weighted-average maturity of their investments was 53 days. The funds held $187 billion of short-term securities issued by European banks at the end of April, down from $329 billion in 2010. The European banks with the most securities held by the funds are Credit Suisse Group AG of Switzerland, France’s Societe Generale SA and Sweden’s Svenska Handelsbanken AB, with holdings of $18.8 billion, $16.4 billion and $13.7 billion respectively.

The funds surveyed were Fidelity Cash Reserves, JPMorgan Prime Money Market Fund, Vanguard Prime Money Market Fund, Fidelity Institutional Money Market Portfolio, Fidelity Institutional Prime Money Market Portfolio, BlackRock TempFund, Federated Prime Obligations Fund, Schwab Cash Reserves, Western Asset Institutional Liquid Reserves and Dreyfus Cash Management Fund. Together, the funds managed $687 billion in assets as of the end of April, including repurchase agreements backed by government debt.

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