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Home / Business / Does the withdrawal of Deutsche Bank mean that investment banking is a liability? – Quartz

Does the withdrawal of Deutsche Bank mean that investment banking is a liability? – Quartz



How many investment banks are too many investment banks?

This week Deutsche Bank has made a big withdrawal from the business. Germany's largest bank, with around 18,000 jobs, is reducing one fifth of its workforce and is expanding its investment banking and trading units. In its most radical restructuring so far, the company will focus on more stable corporate banking for primarily European clients.

The Frankfurt-based company is currently receiving all the attention, but is no runaway. Every major bank has gone through a profound change in thinking since 2008. This year, several top companies in Manhattan were devoured by other banks, and Lehman Brothers collapsed. The Royal Bank of Scotland soon fell from the sky. Government guards in the United States and Europe, who ripped off the financial system, set about building a safer and more stable financial industry.

They were largely successful. This means that risky things like buying and selling securities are no longer the money makers they used to be. Goldman Sachs, known for its trading strength, has entered the retail banking business. His nemesis Morgan Stanley switched to asset management – a step that paid off (paywall). The Swiss UBS and Credit Suisse have downsized their investment banks, as have the British RBS, and the Japanese Nomura has stumbled out of its home market the tip of what's left, but it's not quite the funny oligopoly, it seems. Francesc Rodriguez Tous, a finance professor at Cass Business School in London, believes that they are still exposed to intense competition, but often from nimble non-banks. Automated high-frequency trading companies and specialized boutique investment banks are penetrating deeper and deeper into their markets. Startups are pecking at their feet, and big tech like Facebook is circling.

Is investment banking at risk? Not quite. There is still a lot of money to be made and the members of this smaller group of mostly American mega-banks are still too big to fail. The overhaul of Deutsche Bank, however, is an indication that the world is no longer room for as many big banks as before, what other companies have admitted for years. If the trends of the last decade continue, their class could become even smaller.


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