If you have’t been aware of how the STI has been performing, it has dropped 1% before steadily climbing up in the late afternoon today. So what’s going on that is causing all the fear and volatility? While fear of Deutsche Bank collapsing has been lingering for months, it seems that it has escalated higher where some hedge funds are starting to withdraw their accounts. This is essentially a bank run on a small scale, much similar to the one in 2008 where institutions stopped trading with affected parties due to counterparty risks. Well, before you start withdrawing all your cash positions from Deutsche Bank, here’s how it works.
1. If a bank run really happens on Deutsche Bank or if it does go bankrupt, its underlying liabilities and trading exposures will negatively affect the ENTIRE FINANCIAL WORLD.
2. Since banks deal with each other in multiple ways, the results …Read the full article →