Deutsche Bank fined US$157m by Fed over chat rooms, Volcker

The Deutsche Bank logo in front of its headquarters in Frankfurt, February 24, 2011. — Reuters pic
The Deutsche Bank logo in front of its headquarters in Frankfurt, February 24, 2011. — Reuters pic

WASHINGTON, April 21 — Deutsche Bank AG will pay US$157 million (RM690.9 million) to settle separate accusations that it was unaware of its foreign-exchange traders chatting online with competitors and that it hasn’t properly complied with Volcker Rule constraints on investments, the Federal Reserve said yesterday.

In unrelated enforcement actions, the Fed fined the Frankfurt-based lender US$136.9 million for faulty oversight of its FX traders and US$19.7 million for failing to keep tabs on the kind of trading banned by the Volcker Rule — the first major enforcement action by a US banking regulator over that core component of the 2010 Dodd-Frank Act.

“We are pleased to resolve these civil enforcement matters with the Federal Reserve,” said Renee Calabro, a Deutsche Bank spokeswoman. She declined to comment further on the latest in a series of government actions against the company. In December, the lender agreed to settle a US mortgage-backed securities probe for US$7.2 billion.

In yesterday’s FX settlement, the Fed ordered the bank to improve its senior management’s oversight of foreign exchange trading and cooperate in any investigations of the individuals involved.

Transcripts of chats between Deutsche Bank traders and those from other banks emerged more than a year ago in civil litigation over the matter filed in Manhattan, and the US Justice Department had been looking into the bank’s currency-trading activities. In March, the bank said the department had informed it that the US criminal inquiry had been closed without action.

And in the Volcker Rule enforcement action, the Fed said that significant gaps existed across key aspects of the bank’s compliance programme.

The problems were flagged by the company last year and reported to the Fed, which noted in yesterday’s order that Deutsche Bank wasn’t able to properly monitor transactions that fall into allowed market-making rather than banned proprietary trading. — Bloomberg

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