I'm re-running some of the Fed's stress tests and, somehow, still find myself flabbergasted that DB is at the top of my risk list. Despite only having $12bn of exposure, if they see a 60% loss on that risk alone (assuming 60% recovery and 1.5x leverage), they breach their 4.5% capital requirement. That's the lowest threshold I'm finding across all of the banks the Fed stress tests.

Now 50% loss means wipe out. But given the size of the portfolio, there is also the concentration risk. A single private-credit firm going bust shouldn't take out a bank. But that seems–seems!–to be what I'm seeing.

> If the bank has trouble, shareholders/executives lose - if the banking system has trouble... then QE will solve the bank trouble

It's a game of chicken, though. The folks at Lehman and SVB didn't cash out. JPMorgan did. (Both times. Actually, all of the times since 1907.)

When can qe start ?

> they're using their private-credit portfolio as a Tier 1 capitalization

Banks' private-credit lending constitutes part of their risk-weighted assets. So yes, it's part of their CET1 [1], which is part of Tier 1 capital, and since it's equity measured it incorporates fucking everything.

4.5% is the U.S. minimum. Regulators start throwing their toys out of the pram when a bank breaches 7%. To be clear, I'm not seeing anyone in the near future breaching those limits. Deutsche Bank, the stupidest of the lot, seems to have let DB USA stuff most of the risk in its German AG.

[1] https://www.investopedia.com/terms/c/common-equity-tier-1-ce...