The fear surrounding the possibility of an exit by the United Kingdom from the European Union has taken a grip on banking shares today, especially after three real estate funds halted withdrawal of investors’ money. The Deutsche Bank share has declined more than 4.5 percent today, however, it isn’t the biggest loser since the referendum. Deutsche bank attracted focus when it was revealed that billionaire investor George Soros has taken a sizable short position in Deutsche Bank.
Deutsche Bank’s share price has declined about 25 percent since the referendum and 50 percent since the beginning of the year. Its US operation has also failed to pass Federal Reserve’s stress test twice, which means fresh capital injection in the United States. Fed has the power to punish a bank if it fails the stress test twice.
Global stocks have benefited in the hope that there would be more stimulus from central banks and banking shares have taken a hit as further reduction in interest rates will hurt their margins. Bank of England has announced yesterday that it will ease capital requirements for the UK banks so that they can continue to lend.
As the London is the biggest global financial hub, the banks have taken a rather sharp hit since the referendum. Worst hit has been Royal Bank of Scotland, whose share price has dropped around 40 percent since the voting.
