Deutsche Bank Obscured Risk of Loans

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July 11 (Bloomberg) -- Bloomberg’s Elisa Martinuzzi reports on Deutsche Bank’s opaque loans and the legality of their practice. She speaks on Bloomberg Television’s “On The Move.” (Source: Bloomberg)

Tell us, the documents indicate that starting in 2008 at the height of the financial crisis, deutsche bank was lending to banks around the world using a mechanism, an accounting mechanism that allowed it to produce the balance sheet effect of its own.

If you take a typical secure loan, such as company a lends to company b and company a records the asset.

They created a liability in side trades and offset the asset, the loan and reducing the balance sheet effect of the transaction.

Elisa, i guess we have to make it perfectly clear, this is legal but i guess it is complicated and deceptive here and should stakeholders be concerned about?

Well, according to the accounting experts we spoke with, this type of accounting mechanism meets criteria of international reporting standards.

It is absolutely fine and not questionable.

For others, however, it is as though -- it's not in the spirt ofit of law.

It intends the risk not to be move away from the balance sheet . how does this practice affect the leverage debate?

Well, on several fronts.

Starting with the -- companies are having to disclose this type of setting through new international financial reporting standards.

So these numbers are starting to come out in its quarterly statement.

Deutsche bank reported 400 billion euros worth.

Investors are seeing this type of news for the first time.

At the same time -- finish your thought.

At the same time, we have the basel committee that has proposed a review that may bring out some of these assets.

Various estimates are floating, as much as 33% increase in certain banks assets as a result.

It is something we have to watch out for.

Our chief european financial correspondent from milan.

This text has been automatically generated. It may not be 100% accurate.


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