Deutsche Bank AG is to sever all ties with President Trump and the Trump organization.
But the bank will still be forced to deal with the Trump family for some time to come with outstanding loans of more than $300 million yet to be repaid.
The decision by the German bank follows a glut of social media companies and other firms which are suspending links with the President following last week’s rally at the Capitol which left five people dead.
A second, smaller lender, Signature Bank which is based in New York, has also said it is to cut ties while pushing for Trump’s resignation.
Signature has said it is closing two personal accounts in which Trump holds around $5.3 million.
In November, Deutsche Bank said that Trump’s longtime banker had resigned.
Rosemary Vrablic, an employee in the private banking division, oversaw the approval of hundreds of millions of dollars in loans to Trump’s company over several years.
The relationship meant the bank came under pressure from lawmakers and prosecutors looking for information during Trump’s presidency.
As of November, Deutsche Bank had about $340 million in loans outstanding to the Trump Organization, currently overseen by his two eldest sons.
The money comprises of three loans which are against Trump properties and start coming due in two years.
The loans are current on payments and personally guaranteed by the president, according to two bank officials.
The loans, which are against Trump’s golf course in Miami, and hotels in Washington and Chicago, are such that the Trump Organization has only had to pay interest on them so far, and the entire principal is outstanding.
They come due in 2023 and 2024, the filings show.
But the businesses backing the loans are currently facing challenges.
The coronavirus-driven economic slowdown has hit the travel industry, including hotels.
In October, Trump’s plan to make money by developing houses and hotels on his golf courses, including one involving the Deutsche Bank loan, has not panned out so far.
Deutsche Bank executives are said to not be unduly concerned about Trump’s ability to repay the loans, given the president’s personal guarantees and the time left before they come due.
Nevertheless, in meetings in recent months, a Deutsche Bank management committee that oversees reputational and other risks for the lender in the Americas region has discussed ways in which it could rid the bank the relationship.
Over the years, the bank has lent Trump more than $2 billion.
Various ideas have been put forward to speed up the cutting of ties with one being to sell the loans in the secondary market.
But the idea has not gained traction, in part because it is not clear who would want to buy the loans. Another alternative might be to forgive the loans altogether.
It has been known for several years that Deutsche Bank was looking at its relationship with Trump and in 2016 set up a working group to review its position.
But the election and its aftermath coupled with last weeks siege of Congress have increased the eagerness with which the bank is proceeding to cut itself loose.
The bank, which first started lending to Trump in the late 1990s, has been dragged into congressional and other investigations into the real estate mogul-turned-politician’s finances and alleged Russia connections.
The probes and the bad press were seen as ‘serious collateral damage’ from the relationship, and were an unwelcome distraction for the bank at a time when Chief Executive Christian Sewing was trying to turn Deutsche Bank around after its decades-long run at becoming a major Wall Street bank left it nursing huge losses.
Elizabeth Warren, a Democrat member of the Senate banking committee, has previously called for an investigation into Deutsche Bank over its money laundering controls and has demanded answers from the lender about its relationship with Trump and his family.
She told Reuters that she intended to keep pushing for a probe in the next administration.
‘You bet I’m going to continue to fight for accountability and strong enforcement of our banking laws, especially for giant institutions like Deutsche Bank,’ she said.
Once Democrats take control of the White House later this month, senior Deutsche Bank executives believe congressional investigations that have stalled amid a court battle over access to Trump’s financial records could be restarted.
Deutsche Bank executives will also have more freedom to deal with the loans and end their relationship with Trump once and for all.
Once Trump is out of office it will be easier for the execs to demand repayment, foreclose if he is not able to pay it off or refinance, or try to sell the loans, according to two of the three bank officials spoken to by Reuters.
Since Trump has personally guaranteed all the loans, Deutsche Bank could also seize the president’s assets if he is unable to repay.
Signature Bank issued a statement Monday which said: ‘We believe the appropriate action would be the resignation of the president of the United States, which is in the best interests of our nation and the American people.’
Signature bank looked after Trump and family members including Ivanka Trump, Jared Kushner and Michael Cohen.
In 2011, the bank appointed Ivanka to its board, but she stepped down a couple of years later.