the The Federal Reserve said in private Deutsche Bank AG that its compliance programs are not until snuff, signaling that the scandal-ridden bank is failing to adhere to a number of deals with US regulators, according to people familiar with the matter.
The Fed’s recent warning came in an annual regulatory assessment that said Deutsche Bank had failed to improve its risk management practices despite being under confidential contract with the central bank to resolve the issues, said people. The assessment letter asks the executives of the German bank to prepare for possible sanctions, including the possibility of a significant fine, said a person briefed on the matter.
The Fed’s latest warning is a setback for managing director Christian Sewing, who worked diligently to mend Deutsche Bank‘s relationship with banking supervisors after a tumultuous period in which the lender stumbled from crisis to crisis. the other. He now has a new hurdle to overcome – and it’s probably a big hurdle.
Read more: Deutsche Bank’s days of dysfunction are finally receding under the seam
Deutsche Bank spokesman Dylan Riddle said the company is not commenting on any communication with regulators. A Fed spokesperson also declined to comment.
Deutsche Bank has had numerous pushes with US regulators – including currency violations and links to money laundering cases. The lender has also been the subject of numerous orders from the Fed on how the company manages risk, and the company’s efforts to revise its controls have failed to convince the agency that the bank’s problems are behind it, people said.
In a move that has shown the company to be focused on compliance issues, Deutsche Bank last week elevated Joe Salama, who had served as General Counsel for the Americas, to the position of global head of financial crime. and group money laundering. He succeeded Stephan Wilken, in office since October 2018.
While talks with the Fed over Deutsche Bank’s ongoing missteps are in their infancy, the bank has faced similar divisions with the agency in recent years and has been fined. The penalties include a $ 137 million settlement over allegations that traders rigged currency benchmarks and a $ 41 million penalty for money laundering vulnerabilities.
Despite the Fed’s scrutiny, there are signs that Deutsche Bank has improved its risk management, at least in some areas. The company was born out of the March collapse Archegos Capital Management is unscathed, while other banks that have done business with Bill Hwang’s family office have lost more than $ 10 billion combined.
The turn of fortune after years of gloom has pushed Deutsche Bank’s share price up to outperform rivals as the Sewing overhaul has taken hold, and is up 38% this year.
Still, other problems remain possible, as the Fed shows targeting the bank’s compliance systems. The stock is still trading at one of the largest discounts to book value among European lenders, with stocks still well below their peak, and the bank has lost money over the course of five of the past six years.
(Updates with stock performance in the ninth paragraph.)