European banking regulators have told Deutsche Bank AG that they’re “not satisfied” with the German lender’s internal review that found that some employees deliberately circumvented controls to make big profits by mis-selling foreign-exchange derivatives, the Financial Times reported.
(Bloomberg) — European banking regulators have told Deutsche Bank AG that they’re “not satisfied” with the German lender’s internal review that found that some employees deliberately circumvented controls to make big profits by mis-selling foreign-exchange derivatives, the Financial Times reported.
The European Central Bank and German financial supervisor BaFin have expressed frustration with the probe, the paper said, citing people briefed on the matter whom it did not identify by name.
Regulators citied methodological shortcomings as well as the length of time it took to conduct the investigation and punish those concerned and argued that taking a broader sample of transactions when checking the quality of internal controls would have been a better approach, according to the FT.
An ECB spokesman declined to comment. Deutsche Bank and BaFin did not immediately respond on Sunday to emailed requests for comment.
The bank’s probe — known as Project Teal — showed that some employees on a London-based foreign-exchange desk sold derivatives to small and medium-sized Spanish companies even though they knew that the products were too complex for those clients, people familiar with the matter told Bloomberg last week.
Staff exploited deficiencies in controls to keep the lucrative business going for several years, the people said, asking not to be named discussing confidential information.
Fewer than a dozen Deutsche Bank employees have been sanctioned as a result of the probe, which targeted the London desk and some parts of the lender’s Spanish operations, one of the people said. Some have left and others have been disciplined, including bonus cuts, the person said.
A Deutsche Bank spokesman said last week that the lender had “taken appropriate action” following a review of sales activities in structured FX derivatives. He declined to comment on “the specifics of these matters.”
“As we and our regulators would expect, we are improving our processes and enhancing our controls,” the spokesman said.
(Updates with ECB response in fourth paragraph)
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