Deutsche Bank AG (DBK) fell in New York trading after the Wall Street Journal said that bank overseers faulted some of the firm’s businesses in the U.S. last year for “inaccurate and unreliable” financial reports.
A Federal Reserve Bank of New York review of the company’s U.S. operations also found they suffer from inadequate oversight and auditing, as well as weak technology, the newspaper said, citing documents it reviewed. Deutsche Bank’s American depositary receipts (DB:US) declined 2.9 percent today to $34.80 in New York, the biggest drop in more than a month.
“The size and breadth of errors strongly suggest that the firm’s entire U.S. regulatory reporting structure requires wide-ranging remedial action,” Daniel Muccia, a New York Fed senior vice president who supervises Deutsche Bank, wrote in a Dec. 11 letter to the Frankfurt-based lender, according to the Journal. The letter said the company also hadn’t made progress toward fixing lapses identified previously.
Deutsche Bank, Germany’s largest lender, told shareholders in January that it’s investing in more robust controls and hiring to meet regulatory challenges. The firm said this month that it plans to hire about 500 people in compliance, risk and technology in the U.S. The bank will make the additions by year-end, Jacques Brand, head of Deutsche Bank North America, said in an interview with Bloomberg News at the time.
Andrea Priest, a spokeswoman for the New York Fed, declined to comment on the Journal’s report and said she wouldn’t make Muccia available for comment.
“We have been working diligently to further strengthen our systems and controls and are committed to being best in class,” Michele Allison, a spokeswoman for Deutsche Bank in New York, said in a statement. The bank has said it’s investing 1 billion euros ($1.35 billion) in that effort and assigned 1,300 people to the program.
The company’s stock has slid 19 percent to 26.66 euros this year in Frankfurt trading. That compares with a 1.6 percent decline for the 43-company Bloomberg Europe Banks & Financial Services Index.
Banks worldwide are under pressure to beef up regulatory compliance and are accelerating hiring in those divisions amid heightened scrutiny of their strength and probes into the manipulation of benchmark interest rates, the alleged rigging in currency markets and money laundering.
The complaints from regulators focus on data in quarterly regulatory filings from two of the U.S. division’s subsidiaries and the parent company’s New York branch, the Journal wrote.
New York Fed examiners expressed concerns to Deutsche Bank about the quality of the data in 2002, 2007 and 2012, according to the newspaper’s account of the December letter. In one example cited, examiners found Deutsche Bank Trust Company Americas incorrectly assessed the value of collateral when reporting the value of loans in which borrowers were at risk of defaulting.
While meeting with two top U.S. executives in September, Fed officials described the firm’s reporting as the worst among its peers, the newspaper wrote, citing an e-mail from the company that it reviewed.
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