The nervousness among bank investors does not subside: At the end of the week, Deutsche Bank in particular came under massive selling pressure. The shares of Germany's largest financial institution slipped by up to 14.9 percent to 7.95 euros, as strong as last during the stock market crash of March 2020.

Since the collapse of Silicon Valley Bank in the USA and the beginning of the banking crisis a good two weeks ago, Deutsche Bank's shares have lost around 30 percent – thus dissolving around seven billion euros in market value into thin air. Currently, Deutsche Bank is still worth a good 16.5 billion euros.

According to traders, the rapid increase in the CDS of the Frankfurt money house, i.e. the prices for hedging against payment defaults on bank bonds, caused unrest at the end of the week. To hedge a 10 million euro package of Deutsche Bank bonds, according to the data provider S&P Market Intelligence, more than 200,000 euros had to be paid on Friday instead of 142,000 euros as on Wednesday.

Emergency takeover of Credit Suisse

However, financial experts consider Deutsche Bank to be resilient. "We are relatively relaxed given the bank's robust equity and liquidity positions," analysts at Autonomous Research wrote in their analysis. "To be clear, Deutsche Bank is not the next Credit Suisse."

Since the emergency rescue of the major Swiss bank Credit Suisse by rival UBS last weekend, many investors have been worried about the crisis of confidence spreading to other financial institutions. The CDS of other major financial institutions such as UBS, Societe Generale and Intesa Sanpaolo also shot up on Friday. The shares of the second major financial institution in the Dax, Commerzbank, fell by 10.4 percent to 8.41 euros. At Coba, the stock market value fell by around four billion euros to 10.8 billion euros in the past two weeks.

Focus on special bonds

The prices of equity-like bonds (AT1) of Deutsche Bank also fell according to data from the online broker Tradeweb, which caused the yield to rise to 24 percent. This was twice as high as two weeks ago. Equity-like bonds issued by banks have come under pressure since Credit Suisse was forced to write down 1 billion Swiss francs worth of AT16 debt to zero as part of the UBS takeover. "The impact of the write-down at Credit Suisse has raised questions about an important part of bank financing," said Stuart Cole of asset manager Equiti Capital.

Separately, Deutsche Bank announced in the morning that it would redeem $24.1 billion of subordinated bonds before maturing in 5 on May 2028. The institution will repay these so-called Tier 2 bonds with the ISIN number US251525AM33 at 100 percent of their nominal value with the interest accrued up to the redemption date.

Several EU heads of government, meanwhile, have shown themselves relaxed in the face of the recent turmoil in the banking sector. "We have learned our lesson after the banking crisis," Estonian Prime Minister Kaja Kallas said ahead of the start of the second day of the EU summit in Brussels. The European banking system is sufficiently resilient, she stressed, but called for improvements to the European banking union.

Belgium's Prime Minister Alexander De Croo said they saw "no risk for the moment". EU colleagues would say the same thing. The banks would have sufficient liquidity. "I think the European Central Bank's recent rate hike shows that the ECB has confidence in financial markets." Regulation in the EU is different than in the United States. Slovakian Prime Minister Eduard Heger also weighed in. "We have enough tools to control the banking sector." The institutions did a good job.

Bundesbank President Joachim Nagel, in turn, said that in his view the European Central Bank (ECB) should not move away from higher interest rates too early in the fight against inflation. It is necessary to raise the key rates to sufficiently curbing levels, so that the inflation rate returns in time to the target of two percent, said Nagel on Friday in a speech in Edinburgh, according to the manuscript.

"We should also keep policy rates sufficiently high for as long as necessary to ensure lasting price stability," he said. Currently, inflation in the euro area is still far from the ECB's target of two percent. In February, it was more than four times as high at 8.5 percent.