The Fed charged the bank with “unsafe and unsound” FX practices and noncompliance with the Volcker Rule.
The central bank for the U.S., the Federal Reserve System, has hit troubled Deutsche Bank with $156.6 million in civil money penalties and requirements that the bank improve its senior management oversight and controls relating to foreign exchange (FX) trading.
“Deutsche Bank lacked adequate governance, risk management, compliance, and audit policies and procedures to ensure that Deutsche Bank’s covered FX activities complied with safe and sound banking practices and applicable internal policies,” according to the Fed’s order.
Federal Reserve officials recently announced the enforcement actions against the German financial institution, which will require the bank to pay a “$136.9 million fine for unsafe and unsound practices in the foreign exchange (FX) markets, as well as a $19.7 million fine for failure to maintain an adequate Volcker Rule compliance program prior to March 30, 2016,” according to Fed officials.
“In levying the FX fine on Deutsche Bank, the board found deficiencies in the firm’s oversight of, and internal controls over, FX traders who buy and sell U.S. dollars and foreign currencies for the organization’s own accounts and for customers,” according to the Fed. “The firm failed to detect and address that its traders used electronic chatrooms to communicate with competitors about their trading positions.”
Fed officials are also requiring the firm to “cooperate in any investigation of the individuals involved in the conduct underlying the FX enforcement action and is prohibiting the organization from re-employing or otherwise engaging individuals who were involved in this conduct,” according to an official statement.
For the new controls and oversight, Fed officials in their official order want bank officials to “submit the written plans and programs that are acceptable to the Reserve Bank,” within three months. The Fed also wants “a timeline for full implementation of the plan or program with specific deadlines for the completion of each component of the plan or program.”
Once they get approval from the Fed, bank officials have 10 days to adopt and start implementing new plans and programs. “Upon adoption, the bank, DBUSA, and the branch shall promptly implement the approved plans and programs and thereafter fully comply with them,” according to the order.
In addition, Fed officials uncovered “gaps in key aspects of Deutsche Bank’s compliance program for the Volcker Rule,” which prohibits proprietary trading and ownership in hedge funds or private equity funds, officials say.
“The board also found that the firm failed to properly undertake certain required analyses concerning its permitted market-making related activities. The consent order requires Deutsche Bank to improve its senior management oversight and controls relating to the firm’s compliance with Volcker rule requirements,” according to the Fed.
In response to the actions of the Fed, Deutsche Bank officials sent FTF News the following statement: “We are pleased to resolve these civil enforcement matters with the Federal Reserve.”
Need a Reprint?