Only a few months ago, the Frankfurt-based company completed an internal investigation into derivative swaps.
(Photo: dpa)
Frankfurt Deutsche Bank has drawn renewed criticism from the European Central Bank for its practice of selling foreign exchange products – although the institution has only just reformed previous practices following an internal investigation. The ECB’s supervisory team overseeing the bank has told Deutsche Bank that it needs to improve oversight and controls over the business that sells currency derivatives, such as swaps, to companies. People familiar with the matter reported this to the Bloomberg news service.
Only a few months ago, the Frankfurt-based company completed an internal investigation, the so-called Project Teal. It was about allegations that it had sold derivatives to Spanish companies that were too complex for customers.
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But the ECB complains that the bank still does not sufficiently inform its customers about the risks of the products, said the people, who asked not to be named. Deutsche Bank and ECB officials declined to comment.
The reprimand of the Frankfurt supervisors counteracts the efforts of CEO Christian Sewing, more than half a decade after taking office, to draw a line under scandals and supervisory problems of the past. Although he has cleared up some legacy issues, new problems keep popping up that incur costs and require attention.
Project Teal resulted in the departure of several employees and settlement payments in the tens of millions. At least one case could not be resolved by settlement and went to court.
Deutsche Bank then changed some controls and procedures, although it found no evidence that other departments were following similar practices, sources close to the investigation said at the time. The ECB and the German banking regulator Bafin considered Project Teal to be too narrow and criticized its long duration. However, the supervisors have now filed that – so the current criticism relates to the current practice.
It is at least the second time that part of Deutsche Bank’s investment banking arm, headed by CEO Fabrizio Campelli, has been criticized by the top regulator. The ECB had previously imposed higher capital requirements on the bank’s leveraged finance business due to alleged deficiencies in risk management.
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