The background to the multi-million dollar glitch is a complex certificate business for a private custody account customer.
(Photo: Bloomberg/Getty Images)
Frankfurt The German Securities Service Bank (DWP), which is jointly owned by the German savings banks and cooperative banks, is costing almost the entire profit for the year 2022. CEO Heiko Beck spoke to the Bloomberg news agency on Thursday about an “operational accident” that led to losses for the bank led 61 million euros. As a result, the pre-tax result fell to 1.9 million euros, compared to 57.3 million euros in the previous year.
The background is a complex certificate business for a private custody account customer. The bank had to purchase a large number of certificates at the current market price on its own account.
“We are considering legal action against others, which may reduce the damage,” said Beck. The incident is based on a causal chain with many participants. The examination and processing of events is well advanced, but the bank first wants to have a complete picture before commenting on the details. That will likely be by the end of the second quarter, Beck said.
According to earlier information, the cause of the expensive breakdown lies in errors within the process chain for securities settlements. At the time the certificates were bought and sold, the number of securities was greatly reduced by the issuer via a reverse split. The private custodian bought many certificates at the old price and was able to sell most of them at the new, much higher price.
Beyond the erroneous stock exchange business, it was a strong financial year, said Beck. Commission earnings increased to EUR 320.7 million, an increase of EUR 7.5 million.
52.3 million securities transactions processed
A positive development was also recorded for other key figures such as savings plans and deposit items. The net inflow of funds in the order business amounted to 34 billion euros, despite inflation and uncertainties, for example in connection with the Ukraine war.
“Many investors are no longer as easily spooked by market fluctuations as they were in the past when businesses were more cyclical,” said Beck.
Last year, DWP Bank processed 52.3 million securities transactions, almost a million orders more than in the previous year. A good quarter of all transactions are now accounted for by savings plans.
service provider in the background
DWP Bank itself does not appear in the end customer business, but is a service provider in the background. Around three quarters of all banks in Germany have outsourced their securities processes to them, such as DZ Bank and its affiliated cooperative banks, 331 savings banks, state banks such as Helaba and NordLB and private banks.
The core capital ratio was 24.5 percent at the end of December, and the number of employees at the same date was 1,253. Due to the integration of the customer Postbank into the parent Deutsche Bank, DWP Bank will lose several hundred thousand custody accounts in the current year.
The shareholders of DWP Bank are Deka Bank, BayernLB, Helaba, the Rheinische Sparkassen- und Giroverband and the Sparkassenverband Westfalen-Lippe as representatives of the Sparkassen-Finanzgruppe with a total of 50 percent and the cooperative DZ Bank with 50 percent.
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