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Post: 15 years of Lehman bankruptcy: Lessons learned from crises?


On September 15, 2008, it became clear: US bank Lehman Brothers went bankrupt. It is the first stone of the domino chain that plunged the world into financial crisis. Did we learn?

“Lehman 2.0” – whenever a crisis comes to a head, the comparison with the fall of 2008 is not far off.

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The bankruptcy of US investment bank Lehman Brothers on September 15, 2008 is deeply etched in social memory. But a lot has changed in the 15 years since then.

Lehman’s bankruptcy triggered a domino effect in 2008

Flashback: After a dramatic weekend of late-night negotiations, it was clear on a Monday morning in September 2008: The rescue of globally networked US investment bank Lehman Brother had failed. The state is abandoning a 158-year-old bank that was thought to be too big to fail.

Footage of bankers carrying their belongings stuffed into boxes from a New York office tower has been circulating around the world. The financial world, which has been alarmed for months due to the real estate crisis in the USA, is in shock and the global economy is on the verge of collapse.

Bank rescue in crisis: deployment of expensive fire brigades

Governments are hastily preparing multibillion-dollar rescue packages, and major central banks are jointly cutting interest rates in an urgent action. European Union countries alone pumped nearly 1.6 trillion euros into struggling banks in the months after Lehman’s collapse.

The expensive fire service prevents the worst from happening, even if the economy crashes and the decline pushes other financial institutions into the abyss.

[Zeitreise in Bildern: Obama, Olympia, Finanzkrise – das Jahr 2008]

How does the world want to learn from the crisis?

The great cleansing begins after the great crisis: More controls and stricter rules should make the close-knit financial world more crisis-proof. In general, financial institutions are now forced to hedge their risks with a greater share of their own capital. Institutions in both the US and Europe have to regularly prove through stress tests that buffers will be sufficient even in extreme crisis situations.

Europeans also rely on the triad of central banking supervision, common rules for restructuring and, if necessary, closing down banks, and cross-border protection of bank customers’ balances. However, although new European banking supervision and a common EU banking decision have been established under the leadership of the European Central Bank, common EU deposit insurance is still failing due to resistance.

Expert: A lot has been achieved, but it is far from complete

However, the result from the auditors is positive. German financial regulator Bafin Chairman Mark Branson said in May 2023 that the global financial system had become more stable since the 2007/2008 financial crisis, given concerns that arose when a series of bank failures emerged. The USA may be the beginning of a new global systemic crisis.

We have already accomplished a lot, but we are far from finished.

Mark Branson, Bafin President

“In my view, we must ensure that the challenges of a smaller or medium-sized institution no longer trigger unnecessary fear of infection.” Additionally, large, systemically important banks will need to be able to be liquidated in case of difficulties. Branson warns:

This was the main concern of the reforms after the 2007/2008 crisis. An organization should never be so big that it can never fail again. We must not give up on this goal.

Mark Branson, Bafin President

Economy in stress test: Is there a Lehman 2.0 threat?

The question that is on everyone’s mind is: Can a situation like Lehman happen again? At least Europe’s big banks survived the latest stress test generally better than they did in the crisis exercise two years ago.

Assuming that geopolitical tensions, such as the war in Ukraine, intensify and the corona epidemic resurfaces, financial institutions will have to face losses of 496 billion euros in three years.

European banking regulator EBA found that banks could support the economy even in such a severe economic crisis, despite capital buffers shrinking by 271 billion euros. 2023 stress test.

Source: ZDF

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