Deutsche Bank gets extra-cheap funding because investors think it's Germany's central bank

Sometimes when you're mistaken for someone, it's too embarrassing to correct the person that made the mistake.

And sometimes, it's to your advantage that you don't.

An amazing report from Bloomberg shows that Deutsche Bank is able to access cheaper funding from capital markets because investors think it's the German central bank (the Bundesbank).

A central bank has the capability to produce its own currencies, and is a state institution. For that reason, central banks aren't in the habit of going out of business, and are considered pretty safe.

Deutsche Bank, on the other hand, is a private investment bank.

Here's a snippet from the report, based on comments from Stefan Krause, a Deutsche Bank board member and former chief financial officer:

"It's not Deutsche Bank's wish, but you could almost say that because of our name, a large part of the capital market thinks we're the Bundesbank," Krause said during a panel discussion in Dusseldorf, Germany, on Wednesday. "Global refinancing markets always offered Deutsche Bank good conditions because in the heads of the people there was always an implicit state guarantee...

"People would often tell me that they knew Ackermann, but what was Weidmann's role and why were there two German central banks?" Krause said on the panel, referring to former Deutsche Bank Chief Executive Officer Josef Ackermann and Bundesbank President Jens Weidmann.

It's a bit like when a bankrupt firm called Tweeter saw its stocks go through the roof after social network Twitter's IPO. The company had the stock ticket TWTRQ, as opposed to Twitter's TWTR.

The stocks surged 1,500% because of the confusion.

Then in 2014, when Google acquired thermostat producers Nest, a company called Nestor with the stock ticker NEST also went parabolic. That pushed shares in the company, which was in receivership, up 1,900%.