This page has been archived and commenting is disabled.
Bundesbank Probing Deutsche Bank, Or Not Much Ado About TBTF
Back in December we reported that "Deutsche Bank Hid $12 Billion In Losses To Avoid A Government Bail-Out" in which we wrote "that Europe's most important and significant bank, Deutsche Bank, hid $12 billion in losses during the financial crisis, helping the bank avoid a government bail-out, according to three former bank employees who filed complaints to US regulators. US regulators, whose chief of enforcement currently was none other than the General Counsel of Deutsche Bank at the time." Our somewhat cynical conclusion at the time was that "since every bank in the world is forced to lie, cheat and mismark its own balance sheets every single day... this may just be completely ignored." Perhaps we were a little bit premature because as the FT reports, "The Bundesbank has launched an investigation into claims that Deutsche Bank hid billions of dollars of losses on credit derivatives during the financial crisis, according to people familiar with the situation." That said, we still stand by our conclusion from four months ago: this, too, theatrical distraction will come and go and nothing at all will change.
Investigators from Germany’s central bank are scheduled to fly to New York next week as part of an inquiry into allegations that misvaluing credit derivatives allowed Deutsche to hide up to $12bn in losses, helping it avoid a government bailout.
They intend to interview people, including former employees, who have knowledge of Deutsche’s dealings in complex credit derivatives – known as leveraged super senior trades – between 2006 and 2009.
Deutsche has denied the allegations. On Wednesday the bank reiterated that the allegations were “more than two and a half years old” and had been the “subject of a careful and thorough” investigation by a law firm, which found them “wholly unfounded”.
“Moreover, the investigation revealed that these allegations stem from people without responsibility for, or personal knowledge of, key facts and information,” Deutsche said. “We have and will continue to co-operate fully with our regulators on this matter.”
Three employees approached the SEC independently with allegations that the bank misvalued a giant derivatives position, worth $130bn on a notional basis.
The complainants, who include Eric Ben-Artzi, a risk manager, and Matthew Simpson, a senior trader, alleged that the bank misvalued the positions by failing to account for losses it faced when the market worsened.
Had the proper valuations been made on the positions during the tumultuous period, they allege, the losses for the whole portfolio would have exceeded $4bn and could have risen to as much as $12bn.
$130 billion? That's what JPM's mismarking and prop trading division - the "London Whale" CIO unit used to call an oddlot. And remember the furious punishment the US unleashed on JPM after that whole theatrical Senate hearing involving all JPM traders who were paid tens of millions before being told to retire somewhere warm. Remember? Neither do we.
As for our initial skeptical and cynical assessment, we stand by it, for the same reason as Reuters explained in its piece: "German reliance on Deutsche Bank outweighs scandals"
Germany has become so dependent on Deutsche Bank to grease the wheels of its export driven economy that it looks willing to gloss over scandals involving its largest bank.
Deutsche is one of several European banks under investigation by regulators in Europe and the United States for its suspected role in rigging benchmark interest rates. It is cooperating with German authorities in a separate inquiry into alleged tax fraud. Deutsche has denied allegations it misvalued derivatives and mis-sold mortgage-backed securities.
Such an array of inquiries could be expected to damage any bank's reputation. But back-up from business leaders and key members of the bank's supervisory board appear to be helping Deutsche's new co-chief executives Anshu Jain and Juergen Fitschen put the scandals behind them. The two men, with more than 40 years experience at Deutsche between them, took over as co-CEOs on June 1.
This bedrock of support is crucial for Deutsche, especially in a German election year when banks' perceived excesses and misdemeanors could become a campaign issue.
A web of support for Deutsche has emerged among German blue-chip and mid-sized companies, which have grown more dependent on the country's largest bank since rivals including IKB, WestLB, LBBW, Commerzbank and Dresdner Bank shut down or slashed international investment banking and lending.
Burkhard Lohr, Chief Financial Officer at K+S Group, a supplier of specialty fertilizers and salt, with activities in Canada, Chile and Brazil said a strong Deutsche was vital. "We need banks with a global network, because our markets are also global," Lohr said.
Or, all of the above visually as of 2010 as Zero Hedge first reported over three years ago on the suddenly (post Cyprus) so critical topic of bank assets to host country GDP:
In other words: Deutsche Bank is far TBTF, perhaps Too Bigger To Fail than any other bank in the world, as manifested by DB's razor thin Core Tier 1 ratio to total assets, the lowest in the entire world: the bank knows it can never be allowed to fail which is why it is willing to work with virtually unlimited leverage. After all, if anything happens to it, the German (and global) taxpayers get it. And everyone knows it.
But judicial activist sideshows such as this one are surely great for political brownie points.
- 8526 reads
- Printer-friendly version
- Send to friend
- advertisements -



Deutsche Bank is still alive?
Just Merkel election positioning - she wants to appear on the commoners side. DB controls Bundesbank not the other way around...
Why aren't these three troublemaking whistleblowers in jail like they would be if they tried this in the USA?
Just askin'...
Here we elect them to Congress
also, why/what is this supposed to be referring to? the "FORCED to":
"since every bank in the world is forced to lie, cheat and mismark its own balance sheets every single day.
gotta love a good "probe"
I knew there had to be a reason for all the UBS TV commercials lately.
So we can put the DB rumors to rest. Germany was never going to let em go.
No need. They can let go only the bad parts of it and preserve the "core"
so the securities arm can be cut off? We know that?
Sometimes you have to surgically excise a tumor to save a parasite...
Chris Whalen has been advocating that methodology for BAC it's been 2 years already.
You can't separate the Douche from the Bank
The 'mom and pop' depositors call dibs on the bad parts...
Waste of time! Was kümmert mich mein Geschwätz von gestern. Big yawn.
Nary a one of the behemoth banks has an individual within them willing to say , " the buck stops here " no , not one of them. Not one of the NYMEX floor brokering mom and pops were bailed out when the machines took over , not a one. Someone even took the time to put up a placard that read , " too small to matter ". Such banks are lethal to the economic well being of a nation trying to remain sovereign. There has to be a better way.
sheesh, the american banks look like midgets compared to, in the chart above, the euro banks.
have i mentioned recently that Shithead Ferguson is a retarded idiot, that TF Metals is a website for dumbfuck zombies, and that Zero Hedge would be better off without that URL on its blogroll?
Fuck off and go change the color scheme on your ugly ass website.
what website?
I'm not pimping your link for you.
what link?
www.zombie_r'tard.com
But!!!!! We are being fed a line of bullshit that Germany and its economy and its banking system AND its leadership is the model that all good Europeans should aspire to.
Biggest rule breaker in Europe over last 10 years.
Don't buy the myth!!!!
Next step: DB buys a nice office next to the FED and JPM offices with their unallocated gold vaults. Gold tier-1. Fixed.
I wonder how much drug money goes through Douche Bank a year..... my bet is alot.
They are actually quite good sources of gold and silver, if you live in Germany.
"Germany has become so dependent on Deutsche Bank to grease the wheels of its export driven economy that it looks willing to gloss over scandals involving its largest bank."
And there you have it. Sieg Heil to the corrupt German Banksters...
Derivatives are financial weapons of mass destruction which could unwind during a crisis. Here is a simple explanation of what they are and why they can be both good and dangerous. It is written in plain language by ex-central bankers for a non-specialist audience. With the current “difficulties” in Cyprus about to spread and this sort of investigation into DB, it will be curious to see if derivatives raise their ugly heads again. Who knows how much exposure the TBTF banks have once things unwind a bit?
http://tinyurl.com/blhtc3q