Deutsche Bank wins BaFin reprieve in Russia probe
German financial watchdog is not planning to ask for further actions from the lender
Germany’s financial watchdog, BaFin, is not planning to impose further penalties on Deutsche Bank as it comes to the end of its investigation into€10bn worth of trades involving the bank’s Russian arm.
Authorities in the US and the UK are also looking into the so-called mirror trades, which took place between 2011 and 2015, and which involved Russian clients buying securities in roubles through Deutsche’s Moscow office and then selling identical ones for foreign currency, including US dollars, through the bank’s London office.
John Cryan, Deutsche’s chief executive, has made it a priority to resolve the affair, which — alongside a $14bn initial request from the US Department of Justice to settle a separate investigation into the alleged mis-selling of mortgage-backed securities — is one of the biggest legal uncertainties hanging over the bank.
BaFin’s investigation is not yet formally complete, but the watchdog has no plans to ask for further actions from the bank, beyond the requests that it has already made that Deutsche improve its systems for catching suspicious transactions, according to people familiar with the situation.
BaFin and Deutsche both declined to comment on the news, which was first reported by Germany’s Süddeutsche Zeitung. Shares in the bank were up 0.9 per cent at €12.18 in afternoon trading.
Deutsche said last September that it would close its onshore investment banking business in Russia as part of an effort to reduce complexity and risks. It has also conducted its own investigation — dubbed Project Square — into the alleged mirror trades, and handed its conclusions over to the authorities in Germany, Russia, the UK and the US. It has taken disciplinary measures “with regards to certain individuals in this matter” and said that it will take steps against others “as warranted”.
BaFin’s stance provides some respite for Deutsche, which has endured a tough few days after news of the DoJ’s $14bn settlement request prompted investor fears that the bank could be forced into raising capital or even require a government rescue. Deutsche has insisted that neither is on its agenda, and that it has no intention of settling for anywhere near $14bn.
However, the bigger question in relation to its Russian activities is the outcome of the probes by US and UK regulators, given their ability to levy higher penalties than their German counterparts.
Deutsche has made a provision for potential costs arising from the various investigations into its Russian business, but has not disclosed how much it has set aside. In total, it had €5.5bn of provisions for legal risks at the end of June.
The German bank said separately on Thursday said that it had reached an agreement with staff representatives to lay off a further 1,000 employees in Germany as part of a plan announced last autumn to shed 9,000 staff.