Regulators Tell Deutsche Bank to Enhance Its Risk Controls and Reporting Systems

The Federal Reserve Bank of New York and the state’s Department of Financial Services want Deutsche Bank AG (DB) to improve its technology and compliance procedures and get rid of risk-management deficiencies. The U.S. regulators made the demand to the financial institution via a private memorandum.

The Wall Street Journal says the confidential pact went into effect two years ago. While it doesn’t appear that regulators plan to take other action against Deutsche Bank over this matter, the New York Fed did give the financial institutional a deadline of the middle of 2015 to remedy a number of priority issues. Sources tell The WSJ that there is worry that reporting or trading mistakes by the bank could result in bigger, unplanned losses for the financial institution and even impact the market.

The Wall Street Journal recently reported that the New York Fed discovered that Deutsche Bank’s U.S. operations has known that it had serious financial reporting problems for years but did nothing to remedy the matter. Last year, New York Fed senior vice president Daniel Muccia sent a letter to the bank’s executives saying that the firm’s reports were not accurate and of poor quality. The extent of their errors was such that “wide-ranking remedial action” is needed. Muccia called the deficiencies a “systemic breakdown.” He said that the regulator has been worried about Deutsche Bank’s US outfit for years.

New York’s Department of Financial Services wants to place government monitors in Deutsche Bank. The initiative is part of the regulator’s growing examination of the foreign-exchange market to determine whether manipulation is occurring. Barclays (BARC) has also been singled out for extra observation.

Meantime, the U.S. Commodity Futures Trading Commission wants Deutsche Bank to modify its systems, including make fixes to transaction reporting problems that could be place the firm, and possibly its trading partners, at greater risk. Bank officials said that they’ve been working to tackle compliance and technology problems and enhance systems and controls, including those involved with daily transaction reports and real-time trade confirmations.

Meantime, the bank also faces scrutiny abroad. BaFin, the financial regulator in Germany, is looking into possible interest-rate manipulation involving Deutsche Bank. Ernst & Young LLP is trying to determine when Anshu Jain, the bank’s co-CEO, first found out about the potential manipulation. In 2013, Deutsche Bank agreed to pay a fine of 725 million euros from manipulating Libor-linked interest rates.

Our institutional investor fraud lawyers are here to help our clients recoup their losses. The SSEK Partners Group represents high net worth individuals and different types of institutional investors.

Deutsche Bank Ordered by U.S. Regulators to Improve Reporting Systems, Risk Controls, The Wall Street Journal, August 7, 2014

Deutsche Bank to RBS Fined by EU for Rate Rigging, Bloomberg, December 4, 2013


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