Berlin (WNM) - In recent weeks, several major players in the financial markets have indicated that they are preparing for a new financial crisis.The concerns with many bank executives, policy makers and central bankers are only increasing, when several European banks are hit by the latest Russian money laundering scandal, as Reuters reports.

The most stunning sign of caution so far was the appearance of ECB President Mario-Draghi on Thursday, when the ECB announced a new credit line for banks in the euro zone (TLTRO). The ECB has thus made it clear that it will continue to pump cheap money into the financial sector and has admitted that the years of rescue monetary policy has not brought structural stability to the euro zone.

Already in February Bloomberg had explained in an analysis that the banks in Italy, France, Germany and Spain hold a total of 425 billion euros in Italian public and private sector debt in their books.

Bloomberg writes: "Europe's existing rescue mechanisms were bolted together during the last debt crisis during ongoing operations. German Chancellor Angela Merkel kept the tax hawks at bay while European Central Bank President Mario Draghi flooded the market with liquidity. But Draghi will have disappeared this year and Merkel's power will weaken. Worse still, Italy's financing needs would exhaust the existing capacity of the European Stability Mechanism's rescue funds (410 billion euros) in just one year. Then the next generation of European leaders would have to reassess the cost of keeping their monetary union together."

In Italy, the business paper Il Sole 24 Ore has excavated a paper from the Bank for International Settlements (BIS) that gives gold a new place in the risk weighting of banks. The interesting thing here is the date: The BIS allows the banks to weigh gold as risk-free as of March 29 - the date of Brexit, after which nobody really knows what reaction the markets will show.

The newspaper writes: "The BIS measure is signed by the FED, the ECB, the Bundesbank, the Bank of England and the Bank of France, the G-5 of the major global currency powers. In 2016, when the new rules of the banking system contained in the "Basel 3" package were defined, the Central Bank Committee inserted an epochal norm that no one has yet spoken about publicly. In practice, gold in "physical" bars - i.e. not in the "synthetic" form as certificates - is considered by supervisors to be the equivalent of the dollar and the euro in terms of asset security, thus removing the obligation to weight the security Risk for the purpose of raising capital as with all other financial assets, except for eurozone government bonds (for the time being). The turning point is not insignificant for the gold market and for the role of national gold reserves. The result is significant: the new Basel 3 rules give gold the same status that is now recognised for government bonds on banks' balance sheets. The question therefore arises: is the extraction of gold a prerequisite for applying a risk weighting to government securities held by banks? Indeed, due to the debt crisis, the regulators had a dual objective: to force the banking system to hold adequate capital to cover the extent of the risks. The main focus is on government securities, which can be held by banks under current rules without affecting their assets. The issue mainly concerns low-rated countries such as Italy, Spain, Portugal and Greece, which were considered particularly vulnerable after the debt crisis in 2011".

Signs of nervousness are also increasing in Germany - although all parties are trying to keep the issue off the headlines. At the latest since the visit of Federal Finance Minister Olaf Scholz to the German embassy in London at the end of February, when Scholz talked with investment bankers about a merger of Deutsche Bank and Commerzbank according to FT, it has become clear, however, that Berlin is also relying on crisis preparation. According to Bloomberg on Friday, the management of Deutsche Bank has now also been brought into line. The managers had - with good reasons - so far rejected the merger proposal. As bank insiders say, a merger would above all benefit the French and US American competitors of the Germans, because a merger would leave the bank virtually unable to act for months.

For the German government, however, the merger would have the advantage that a joint bank would in fact be nationalized through the participation of the federal government in Commerzbank. In the event of a crisis, the European bail-in rules could thus be undermined. The reaction of investors to the threat of creditor participation in the German banking sector could easily cause more pain to the the German banks. In Berlin everyone is aware that several Italian banks have been bailed out quieltly over the past years. Hence the government might be inclined to do the same in Germany. With Deutsche in effect beeing partly state-owned through a merger with Commerzbank the German government will be able to act fast and decisive if needed.

German state-owned Deutsche Welle is reporting that Berlin politics has been clearly shifting over the past months and now is pushing for the merger:

With increasing support and possibly pressure coming from German government circles for a merger, it appears that the banks are edging closer towards a union.

A major change in direction from the German government came with the appointment of Olaf Scholz as German finance minister this time last year.

The pro-business Social Democrat politician has regularly emphasized the importance of strong banks, and few could deny that a joint Deutsche-Commerzbank entity would be strong. Based on Friday's closing share prices, a combined bank would have an equity value of more €24 billion ($27 billion), which would equate to one-fifth of the entire German retail banking market.

Such a bank would be able to charge higher prices in Germany, where the multitude of domestic lenders charge very little for several banking services.

Scholz and others in German government circles see the establishment of a stable national banking champion — as opposed to two scandal-ridden, perennially struggling lenders — as a crucial component of Germany's overall economic policy, which is that of an export-led industrial titan that would need sympathetic lenders in good times and bad.

Scholz has previously spoken of strong and stable banks in terms of "national sovereignty" and, along with several in the government, is somewhat seduced by the idea of a souped-up German banking lender providing stronger support for the German industrial and corporate sectors overseas.

Another verse of the siren song captivating proponents of a merger is the idea that a combined entity would represent something of a "European champion” in banking, something which chimes well in an age when many fear reduced European influence in the face of Chinese dominance and US protectionism under US President Donald Trump.