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00:00ALIX: I WANT TO BRING IN DAVID MALPASS. YOU HAVE INSIGHT. WHAT SHOULD DEUTSCHE BANK BE DOING RIGHT NOW? IS IT AN ASSET SALE? IS IT GOING TO THE QATARI GOVERNMENT AND ASKING FOR MORE MONEY? IS IT RAISING DEBT? DAVID: EUROPE'S BANKING SYSTEM IS REALLY HAVING A HARD TIME. GROWTH IS SO SLOW THAT IT IS HARD FOR THEM TO MAKE GOOD ON LOANS THAT THEY HAVE MADE IN THE PAST. ONE OF THE CRITICAL THINGS GOING ON IS THE BANKING SYSTEM NOWADAYS IS MORE MARK TO MARKET THAN IT WAS PRIOR TO THE 2008 CRISIS. ONE OF THE PROBLEMS THAT DEUTSCHE BANK HAS GOTTEN INTO IS PUTTING THINGS OUT OF REACH OF THE MARK TO MARKET, AND OTHER REGULATORS SAYING IT HAS TO COME BACK. IF YOU ARE DOING THAT, EQUITY CAPITAL IS LOWER. THEY HAVE TO MOVE FAST IN ORDER TO SHORE UP EQUITY CAPITAL BUT ALSO GIVE MORE DISCLOSURE ON THINGS ON THEIR ASSETS SIDE. WHAT ASSETS DO THEY ACTUALLY HAVE, AND ARE THEY PROPERLY MARKED? THAT IS THE TROUBLE IN EUROPE . THERE ARE QUITE A FEW BANKS THAT ARE NOT FULLY DISCLOSING THAT THEY HAVE CARRIED OVER LOSSES THAT HAVE BEEN AROUND FOR YEARS AND YEARS AND YEARS. THAT IS WHAT IS COMING OUT. DAVID: THIS IS SUCH A CONFIDENCE MATTER. THEY DO NOT -- THEY DO NOT WANT A RUN ON THE BANK, AS IT WERE. CAN RAISING EQUITY DO THAT? IT WOULD DILUTE THE EQUITY HOLDERS. DAVID: IT WOULD, AND I AM NOT SURE THEY WANT TO RAISE IT IN UP WITH OFFERING. WHAT IS ALSO IMPORTANT HERE IS THE UNCERTAINTY ABOUT THE U.S. FINE. YOU HAVE THIS CRAZY WORLD WHERE THE DEPARTMENT OF JUSTICE, DURING AN ELECTION CYCLE, CAN ASSESS A $14 BILLION OR 14 BILLION EURO FINE, WHICH IS WAY BIGGER THAN DEUTSCHE BANK CAN AFFORD. SO WHAT ARE YOU GOING TO DO ABOUT THAT? EUROPE IS GOING TO COME BACK AT U.S. COMPANIES. SO YOU ALMOST ENTER THIS WAR OF FINES BETWEEN THE GOVERNMENTS OF THE TWO GROUPS. I THINK IT IS DANGEROUS. THEY NEED TO STOP IT AND FIND A

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Deutsche Bank and Europe's Mark-to-Market Problem

David Malpass, founder and president at Encima Global, examines the troubles of Deutsche Bank and European banks and a war of fines between U.S. and European regulators. He speaks on "Bloomberg Daybreak: Americas." (Source: Bloomberg)

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