Chapter 60

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Translated by Heavenly Cat

Read it only at Novelbyu.com & Utoon.net

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“Seems Jho Low is connected to more Korean businesspeople than expected. Plus they say he’s a recognized investor in the entertainment industry too.”

“Really?”

“Yes. They say he’s spending money lavishly on the entertainment side. Seems he’s also acting as a stepping stone connecting Southeast Asian entertainment industry with Korea.”

“I see.”

“..President. You’re not interested in Jho Low right now, are you?”

Jho Low already left my interests long ago.

“Was it too obvious?”

“Yep. President, when you’re listening to topics you’re not interested in, you don’t say much.”

Hye-rin laughed.

Plus I still can’t get used to the title President.

“What do I do when listening to topics I’m interested in?”

“From then your eyes sparkle and you tell me to bring all related materials. So I brought something you’d be interested in. Hehe.”

It was none other than materials about Deutsche Bank.

Since last time, I kept feeling something from this direction so I looked into it.

“As you know, Deutsche is at the forefront of European finance. Just the derivatives tied up there amount to thousands of trillions of won.”

Europe has financial companies called TOP3.

First place is Britain’s HBC.

Second place is France’s ANP Paribas.

And third place was exactly Germany’s Deutsche Bank.

Market cap of 18 trillion won.

Superficially it’s called Deutsche Bank, but it was Germany’s largest financial group and a place wielding powerful influence throughout all of Europe.

They’re estimated to manage assets approaching $2 trillion alone, but the market cap is lower than expected. Actually this is the same for other financial companies too.

Because even if managed assets are large due to asset composition and qualitative issues, plus capital soundness issues, they’re often classified as derivatives or risky assets.

Also, since profit rates are low in proportion to managed amounts, market cap has to be generally low.

“Plus Deutsche has been implicated in money laundering and such suspicions from before, so their stock price is lower than other companies.”

Currently Deutsche Bank’s stock price is 30 euros.

Since the company is so big, they’ve been implicated in various illegal activities and paid many fines.

“But even though there are many related incidents, they’re still strong. You know. That Deutsche Bank is TBTF.”

TBTF.

Too big to fail.

In our country terms, it means a giant that won’t collapse.

Meaning it’s a company that absolutely won’t go bankrupt.

Because if Deutsche Bank collapses, not only Germany but all of Europe shakes.

Meaning it has Lehman Brothers-level impact that happened in 2008.

“Because Deutsche Bank knows the government will help them even if they fall into crisis, there’s much criticism that they’re plotting increasingly bold dirty deeds.”

One might ask why they plot such things being one of Europe’s TOP3 financial groups.

The reason is actually simple.

“To become industry number one. In fact, Deutsche Bank’s chairman announced his ambition to become Europe’s number one and conquer the world market.”

Deutsche Bank, just looking at its scale, had a larger asset scale than Gold Reagan.

But there’s a trap here.

Deutsche Bank’s assets appear to be twice as much as Gold Reagan’s, but that’s only because they forcibly enlarged their size.

“Gold Reagan is an investment bank, meaning their own capital power is considerable. In contrast, Deutsche Bank hastily expanded only their size, so everything is derivatives or risky assets, and they have little own capital.”

The reason Gold Reagan is famous is because of the investment company they operate.

Since not only customers’ money but Gold Reagan’s held asset amount is considerable, they wield that influence in various countries.

Also, when specific risks occur, Gold Reagan has thorough risk management so they had ability to cope with any crisis situation.

However, Deutsche was the exact opposite.

Though they succeeded in expanding their size by concentrating only on derivatives sales, the prevailing assessment was that they lack coping ability when specific crises hit.

However, since Deutsche Bank collapsing was impossible, they received evaluations of being safe.

“Just looking at this credit rating evaluation, they’re currently maintaining A, so the CDS spread will also probably keep maintaining 300bp.”

I thoroughly examined materials related to Deutsche Bank, but no particular feeling struck. But just now at Hye-rin’s words, it felt like my eardrums shook.

“CDS?”

“Yes. Originally it was AAA, but since there are many incidents and accidents, it did fall to A. It’s a company with many risks, but since it’s a company that absolutely won’t collapse, the credit evaluation seems to have come out that way.”

CDS.

Simply put, it’s bankruptcy insurance.

In other words, thinking a specific company will go bankrupt, paying several percent of the contract amount annually.

What if that company really closes its doors?

Then the contract concluded in CDS immediately activates and they must give the contract amount specified there to the contractor.

“…”

I quickly flipped through materials and checked the CDS currently placed on Deutsche Bank.

As Hye-rin said, 300bp.

In other words, paying 3% of the contract amount as annual insurance premium.

If it’s a company with high bankruptcy risk, it jumps above 1,000bp.

“The CDS market has decreased a lot compared to before, right?”

“Yes. Before the Lehman Brothers crisis, the market was so large it reached 1 quadrillion won in our country’s money, but after taking a big hit then, the scale did drop to 8,000 trillion won. Still, it’s still large.”

It has to be, because making money with CDS is too easy.

For example, just keep issuing CDS related to giant companies like Kangsung Electronics or Microsoft and eating premiums reaching hundreds or thousands of billions annually.

Because those large companies won’t collapse.

When they let their guard down like that, they took big damage exactly during Lehman Brothers.

Companies thought to absolutely never collapse closed doors in succession, and insurance money to pay out through CDS became tremendously large, causing financial companies to close doors like dominoes.

If only this CDS didn’t exist, the Lehman Brothers crisis wouldn’t have spread that much.

Nevertheless, many financial companies are still issuing CDS.

Because excluding really occasional crises, there’s no better honey pot than this.

“…”

But this is big trouble.

When intuition about Deutsche Bank first came, I wondered whether I should short or long.

But this was a different case.

What my intuition is strongly reacting to right now is none other than CDS.

What this means is one thing.

‘Deutsche Bank is going bankrupt?’

One of Europe’s TOP3 financial companies goes bankrupt.

It was an absurd matter.

But my intuition was only emphasizing and shouting the CDS letters large. As if preparing for a financial disaster that will come like a tsunami soon.

“..Could you find out how much volume of Deutsche Bank CDS is currently on the market?”

“What? C-CDS?”

Usually Hye-rin follows my instructions without question or objection.

But this time was unexpected, so with a stiffened body she was only blinking.

She also knows.

What CDS means.

“I-I’ll do it!”

Hye-rin went outside with a rigid posture clicking her heels.

Though it’s not a situation to laugh, I unknowingly chuckled.

“But.. It can’t be, right?”

No matter how much they’re a place with many risky assets from hastily expanding their size.

Deutsche, one of Europe’s TOP3 financial companies, collapsing.

It was impossible.

But suddenly the chaotic times of 2008 come to mind.

Though I was young then, there was something all media said in unison.

[Lehman Brothers can absolutely never collapse!]

***

Chairman Kang Seong-ho has a routine.

It’s to definitely exercise in the morning.

He does cardio on the treadmill while watching morning news on the TV in front of it.

While also checking overseas news from overnight.

“!?”

Then Chairman Kang Seong-ho nearly fell off the treadmill he was running on at the first news story of the morning.

“Wait. That bastard..”

The male face decorating the morning news looked very familiar.

“Jho Low?!”

1MDB’s director Jho Low who approached Chairman Kang Seong-ho and Gwangwoon Group the other day.

Money that should’ve been used for Malaysian national interests was actually all used for money laundering, and also using US dollars for Hollywood, US real estate, luxury yachts, etc.

US authorities detected money was sprayed in various places.

Due to this, the Foreign Corrupt Practices Act and exerting influence through purchasing assets within the US.

With numerous financial law violations arising from that, the US government officially revealed Jho Low’s identity and took the lead in announcing the 1MDB scandal to the whole world.

“This crazy..”

His heart sank for a moment.

Just how much did this crazy bastard embezzle that the US government got properly pissed.

A whopping 7 trillion won that this bastard embezzled alone.

If counting what was involved in money laundering, that amount increases tremendously.

If he hadn’t listened to Jeong Jin-ho’s advice back then and put money into 1MDB as Jho Low said..

“Just thinking about it is horrifying.”

Just how much did Jeong Jin-ho know?

No. Now wasn’t the time to leisurely exercise.

“..Are there people who received money from Jho Low? Or went around with him and received entertainment?”

Chairman Kang Seong-ho hastily called executives together.

When the unprecedented swindler Jho Low was staying in Korea, rumors spread that he met with numerous businesspeople and even received entertainment, so Korea was also greatly controversial now.

“No? Say it now if there is. That way we can also prepare.”

“…”

Everyone was silent.

Surely among them, several probably had Jho Low work on them to receive investment from Kangsung Group, but they’re not confessing.

“Good. I’ll trust everyone here. However, if you don’t reveal it even though I gave you an opportunity today and it’s discovered later, you’d better be prepared.”

Meaning hide it well so you don’t get caught.

Whether internally or externally.

“So, how far is this entangled?”

“The bastard Jho Low traveled around all of Asia starting from the US proposing to invest in the sovereign wealth fund, or receiving entertainment while spraying money. So now the US also issued a warrant to catch and kill this bastard.”

“Was he caught?”

“Not caught yet. His whereabouts are also unclear. Above all, America’s will to strike companies related to this incident is certain.”

There Kang Seong-ho breathed a sigh of relief once more.

Actually if the fact that Jho Low is a swindler was revealed in another country and had no relation to the US, he would’ve just passed it thinking ‘I see.’

But the problem was the US.

If there’s a bastard or force that causes them great loss, the US chases to the end of the earth wherever that country is and wrecks them.

That’s why companies are also trembling now.

Because if it’s a company with considerable scale, it has to be connected even a bit with the US, and if they slap fines, that loss will be tremendous.

“There’s nothing that will damage us, right?”

“Yes. If we had put money in the sovereign wealth fund back then.. We would probably be taking hits like other companies.”

Executives also breathed sighs of relief.

Fortunately Chairman Kang Seong-ho stubbornly didn’t bend his will, but if he followed executives’ words, they would’ve literally been fucked.

“Anyway it’s good news for our Kangsung. The Malaysian government started checking after we rejected the sovereign wealth fund, but since it was revealed the current Prime Minister is involved in this scandal, Malaysian public opinion is no joke now.”

The reason this scandal grew was because none other than the current Malaysian Prime Minister was involved in money laundering and fraud using the sovereign wealth fund.

He tried to fill his own belly with money that should’ve been used for national interests.

In other words, it was no different from hitting the backs of all Malaysian citizens’ heads.

“Then Malaysia’s regime might change?”

“Very high possibility. The current Prime Minister might also resign.”

Above all, since the US is involved, the Malaysian government can’t ignore it either.

“We should get close with the next regime. For our sake too.”

“Yes. Since the next regime also knows we’re confronting the current government, we’ll try to utilize that point as much as possible.”

“Yes. For our electronics products and also semiconductor business, we must push into Malaysia. Otherwise we’ll never catch TSNC.”

TSNC.

Taiwan’s largest foundry semiconductor company.

In the DRAM sector, Kangsung is world number one, but in foundry, TSNC was overwhelmingly number one.

“Europe? Is Deutsche still checking?”

“Yes. We tried to establish headquarters in Frankfurt and cooperate with various semiconductor companies, but Deutsche owns the site we want, and above all they seem to have absolutely no intention of accepting us.”

It was a frustrating situation.

If only Deutsche bastards would get out of the way, they could push through quickly to raise semiconductor technology and production capacity and collapse TSNC’s fortress that’s occupying the market fearfully.

“Chairman. May I say one thing?”

It was the Kangsung Securities president who rarely opens his mouth in executive meetings.

“Go ahead.”

“There’s one strange rumor circulating about Deutsche Bank.”

“What rumor?”

“A rumor that Deutsche Bank might go bankrupt.”

“..?”

Chairman Kang Seong-ho wasn’t even surprised.

Because it was an unrealistic story.

“Isn’t it a false rumor?”

“Normally it would be. But wasn’t it revealed this time that Deutsche Bank is also involved in 1MDB?”

“How many times have those bastards been caught money laundering?”

Like other banks too, but there were especially many financial crimes implicated with Deutsche Bank. Yet looking at them maintaining their company so well like that was truly funny.

“Yes. So this time the US announced they’ll impose fines on Deutsche Bank, probably around $1 billion or so.”

“They won’t collapse from just that, right?”

“Right. The problem is the US is slapping fines on companies that aggravated damage during the Lehman Brothers crisis. In amounts exceeding tens of billions of dollars. Gold Reagan already received fines reaching tens of billions of dollars.”

Come to think of it, he heard talk that Deutsche also made money by selling defective products so the US will slap fines.

“From what I hear, the US plans to slap about $14 billion in fines. Originally they planned to slap weaker level fines, but seeing involvement with the sovereign wealth fund this time, they added aggravation charges.”

“$14 billion!?”

An amount reaching almost 16 trillion won in Korean money.

They have to pay all that just in fines.

“But.. Wait. Isn’t Deutsche like Europe’s TOP3 financial companies? They can’t pay $14 billion?”

“If it’s HBC or ANP among the TOP3 financial companies, the blow would be tremendous but still possible. But Deutsche is famous as a place with only large size and not large capital power.”

“There’s the German government, right?”

“Yes. If Deutsche collapses, it’s Lehman Brothers-level from Europe, so the German government can’t just watch. The problem is the German government’s situation isn’t favorable now either.”

Germany has done bailouts several times, and is still doing them now.

“During the Stumbagen crisis, didn’t an unknown specific force appear and sweep the market once? Due to that, several securities firms in Germany closed doors. At that time including Stumbagen, they implemented large-scale bailouts once.”

“And?”

“After Brexit hit, trade with Britain was cut off, and German companies doing shipping business through the EU shook once from Chinese shipping occupation. Until then they could endure, but with crude oil price explosions, Gwangwoon swept up all the work and they were practically smashed.”

Germany’s shipping business is tremendous in scale, second after Switzerland.

Just looking at world top 10, you could find many German companies.

“And then the Belt and Road Initiative project too?”

“Yes. That was the decisive blow. The Chinese government pushed work to Chinese shipping, and Gwangwoon completely dominated the other side. The German government implemented bailouts again somehow trying to save that.”

Such large companies all collapsed now.

There Germany inevitably implemented bailouts to reduce that aftermath.

“But now Deutsche Bank is about to burst too, so the German government has fire dropped on their feet. Though the US hasn’t officially announced yet, it’s certain they’ll slap tremendous fines today or tomorrow. And the decisive thing is, someone bought CDS in bulk from a few weeks before this happened.”

CDS is over-the-counter trading.

So confidentiality is guaranteed, but not perfectly guaranteed.

Because when buying CDS in bulk, securities firms or banks or funds that sold CDS have to invest money elsewhere for risk management.

Then naturally rumors spread and CDS spreads rise.

Didn’t CDS prices also skyrocket before Lehman Brothers went bankrupt?

“High CDS spreads mean that company’s bankruptcy risk is high.”

Seeing that, investors fall into fear.

“Wait. So you mean Deutsche Bank might really go bankrupt?”

“At other times I’d say absolutely not.. But with fines exceeding $14 billion followed by the German government already doing bailouts several times, now the probability is fifty-fifty. Plus CDS spreads are rising tremendously now.”

One of Europe’s TOP3 financial companies might collapse.

It was unbelievable.

Plus someone bought CDS in bulk to amplify this anxiety.

If that anxiety spreads severely, customers with money deposited in Deutsche Bank will withdraw funds, then a bank run occurs.

“Who on earth..”

Then one face briefly passed by.

“President Kim.”

“Yes.”

“During the diesel gate last time, didn’t you separately tell me? That Gwangwoon highly probably made a killing in the German market.”

“Yes.”

“Then this CDS?”

“I don’t know that either, but Stumbagen, shipping domination, Belt and Road Initiative. All are connected with Gwangwoon. If Gwangwoon also did bulk CDS purchases there..”

President Kim swallowed dry saliva there.

“It means Gwangwoon designed everything from the beginning.”

“..!”

Chairman Kang Seong-ho stared blankly at empty space.

This plan wasn’t made by Gwangwoon.

It’s all a roadmap created by Jeong Jin-ho.

Just borrowed Gwangwoon’s name.

And that roadmap’s destination is exactly one place.

The destruction of Deutsche Bank.