Read the following passage divided into number of paragraphs carefully and answer the questions that follow it. Paragraph 1: Deutsche is more leveraged than its peers; it is unusual in lacking a crown jewel around which it can base a business model; and it has a stack of derivatives whose prices are hard to observe in the market. More positively, it is light on the non-performing loans that clog the balance-sheets of banks in places like Italy. But in other ways its problems have a very familiar ring. Deutsche is struggling to make a decent return. It has taken too long to face up to its problems. And the market it operates in is overbanked. Years after American banks were forced to clean themselves up, too many European lenders are still flailing as a result. Paragraph 2: Europeans prefer to blame others for the turmoil. Deutsche has lashed out at “forces in the market” for its most recent bout of trouble. But its shares had already fallen by 42% this year before news broke last month of a proposed Department of Justice (DoJ) fine of $14 billion for mortgage-related misdeeds. German politicians insinuate that the mooted fine represents revenge for Europe’s recent tax case against Apple, an American champion. Yet the DoJ has slapped large fines on American banks, too. Deutsche’s vulnerability to shocks is the problem, not the shocks themselves. Paragraph 3: Fingers also point at global regulators. The boss of Credit Suisse, Tidjane Thiam, says his sector is “not really investible”. It is true that the rules have got much stricter in the past few years, particularly for institutions,
Which of the following sentences justifies the statement, “Deutsche is more leveraged than its peers” as mentioned in Paragraph 1?
(I) Deutsche is struggling to generate adequate profits to stay afloat in the market.
(II) Though the market in which Deutsche operates is overbanked, it has a mound of derivatives whose prices are hard to observe in the market.
(III) Though Deutsche has taken a longer time to face up to its problems, it is still light on the non-performing loans that obstruct the balance-sheets of banks in places like Italy.

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**Solution:**

1. The statement "Deutsche is more leveraged than its peers" implies that Deutsche has a higher level of debt or financial obligations compared to other banks.

2. Sentence (I) states that Deutsche is struggling to generate adequate profits. While this indicates financial difficulty, it does not directly explain leverage.

3. Sentence (II) mentions that Deutsche operates in an overbanked market and holds a large amount of derivatives with prices difficult to observe. This suggests complexity and risk exposure, which can relate to leverage.

4. Sentence (III) highlights that Deutsche is light on non-performing loans compared to banks in Italy, which implies it does not have excessive bad debts, but it has taken longer to address its problems.

5. Paragraph 1 specifically mentions Deutsche's leverage and the presence of a stack of derivatives with hard-to-observe prices, supporting (II). It also notes Deutsche is light on non-performing loans, supporting (III).

6. Sentence (I) is about profitability struggles but does not directly justify the leverage statement.

**Answer:** Both (II) and (III) are correct.

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