Regulators fault Deutsche Bank’s internal probe

Deutsche Bank AG has come under fire from the European Central Bank (ECB) and German regulator BaFin over the way it handled an internal investigation into mis-selling derivatives, raising questions about the investigation’s findings. Supervisors criticised the probe, known as Project Teal, for being too long and not wide enough. The two regulators have reportedly told the lender that the investigation was inadequate in their view.

Representatives of the ECB, BaFin, and Deutsche Bank declined to comment on the rebuke, which was first reported by the Financial Times. The criticism is the latest in a long series of complaints that regulators have directed at the lender over a perceived failure to sufficiently improve controls and compliance systems. Chief Executive Officer Christian Sewing has pledged to fix the gaps and thrown additional money at the issue, causing him to miss cost targets.

Shares in Deutsche Bank fell by 0.9% as at 10.29am in Frankfurt on Monday (Feb 20), paring gains this year to 11%. Project Teal had been investigating dozens of cases for more than two years where some employees sold foreign exchange derivatives to small- and medium-sized Spanish companies, even though they knew the products were too complex for those clients. The investigation, which recently concluded, resulted in settlements with clients worth tens of millions of euros and the departure of several employees.

Although fewer than a dozen Deutsche Bank employees have been sanctioned as a result of Project Teal, which targeted the London desk and some parts of the lender’s Spanish operations, the lender looked at deals and controls beyond the involved London desk. Although it did not find evidence of similar misconduct elsewhere, some wider controls and procedures were changed as a result. The findings of Project Teal have now been questioned, casting doubt on the investigation’s conclusions and the bank’s ability to improve its compliance systems.

Pan Finance is a print journal and news website providing worldwide intelligence on finance, economics and global commerce. Known for our in-depth analysis and opinion pieces from esteemed academics and celebrated professionals; our readership consists of senior decision makers from across the globe.

Contact us