Deutsche Bank. Deutsche Bank AG might need to raise capital . One thing that makes it hard for banks to raise capital is that banks know what is in them and no one else does. There is a market for lemons problem. Banks are opaque and complicated, and if there is one thing the last few years have taught us, it is that there is always some new scandal lurking. The banks know what they own and what they’re up to, and what scandals are lurking, but the investors who might buy their equity don’t, or at least, they don’t trust that they know everything they need to. And banks tend to raise capital when their risks and scandals are most off-putting. "Here, have some of this bucket of writhing goop," the banks offer, and the investors turn up their noses. On the other hand, if you are already immersed in the goop, maybe you’ll think that it’s not that bad? That’s the main logic behind stuff like this : Deutsche Bank AG, Europe’s biggest investment bank, is exploring alternatives to paying bonuses in cash as Chief Executive Officer John Cryan seeks to boost capital buffers and shore up investor confidence, according to people familiar with the matter. Executives at the German lender have informally discussed options including giving some bankers shares in the non-core unit instead of cash bonuses, said the people, who asked not to be identified because the deliberations are private. Another idea under review is replacing the cash component with more Deutsche Bank stock, they said. This trade is essentially a price arbitrage. If you sell Deutsche Bank stock to outsiders who don’t know or trust the bank, they won’t pay you that much for it. But if you give it to insiders instead of […]
