NY Fed Slams Deutsche Bank (And Its €55 Trillion In Derivatives): Accuses It Of "Significant Operational Risk"

Tyler Durden's picture

First it was French BNP that was punished with a $9 billion legal fee after France refused to cancel the Mistral warship shipment to Russia (which promptly led to French National Bank head Christian Noyer to warn that the days of the USD as a reserve currency are numbered), and now moments ago, none other than the 150x-levered NY Fed tapped Angela Merkel on the shoulder with a polite reminder to vote "Yes" on the next, "Level-3" round of Russia sanctions when it revealed, via the WSJ, that "Deutsche Bank's giant U.S. operations suffer from a litany of serious problems, including shoddy financial reporting, inadequate auditing and oversight and weak technology systems."

What could possibly go wrong? Well... this. Recall that as we have shown for two years in a row, Deutsche has a total derivative exposure that amounts to €55 trillion or just about $75 trillion. That's a trillion with a T, and is about 100 times greater than the €522 billion in deposits the bank has. It is also 5x greater than the GDP of Europe and more or less the same as the GDP of... the world.


More from WSJ:

In a letter to Deutsche Bank executives last December, a senior official with the New York Fed wrote that financial reports produced by some of the bank's U.S. arms "are of low quality, inaccurate and unreliable. The size and breadth of errors strongly suggest that the firm's entire U.S. regulatory reporting structure requires wide-ranging remedial action."


The criticism from the New York Fed represents a sharp rebuke to one of the world's biggest banks, and it comes at a time when federal regulators say they are increasingly focused on the health of overseas lenders with substantial U.S. operations.


The Dec. 11 letter, excerpts of which were reviewed by the Journal, said Deutsche Bank had made "no progress" at fixing previously identified problems. It said examiners found "material errors and poor data integrity" in its U.S. entities' public filings, which are used by regulators, economists and investors to evaluate its operations.


The shortcomings amount to a "systemic breakdown" and "expose the firm to significant operational risk and misstated regulatory reports," said the letter from Daniel Muccia, a New York Fed senior vice president responsible for supervising Deutsche Bank.




Deutsche Bank's external auditor, KPMG LLP, also identified "deficiencies" in the way the bank's U.S. entities were reporting financial data in 2013, according to a Deutsche Bank email reviewed by the Journal.

Oh wait, so those €55 trillion in derivatives are actually completely fabricated? Well if that doesn't send the S&P 500 limit up nothing will.

DB's response is the generic one already attempted by that other permacriminal bank, Barclays, which hired a few hundred compliance people after it was revealed that the British firm was manipulating and rigging pretty much every product and market it was involved in.

"We have been working diligently to further strengthen our systems and controls and are committed to being best in class," a Deutsche Bank spokesman said Tuesday. As part of this, he said, the bank is spending €1 billion globally and appointing 1,300 people, including about 500 compliance, risk and technology employees in the U.S. Mr. Muccia declined to comment.

Sadly for now what this latest Pandora's box means is that confidence in Europe's insolvent banks just crashed with a bang once again, not that it would be reflected in the stock's rigged price of course: rigged most likely by Deutsche Bank among other of course.

The New York Fed's concerns also pose a challenge for Deutsche Bank's longtime finance chief, Stefan Krause, who is ultimately responsible for the company's financial figures and has been spearheading efforts to improve the quality of the bank's reporting.


The concerns from regulators strike at the heart of an issue plaguing many of the world's big banks: Some investors lack confidence in the integrity of their numbers. Such fears have been especially prevalent in Europe.

Then again, none of DB's numbers actually matter: if the banks needs a bailout the Fed will promptly step in, and today's advisory has one simple end point, which happens to be the same as the recent BNP $9 billion fine - don't even dare to side with Putin over the US. Because you sure have big bank over there Germany... It would be a pity if the NY Fed i) revealed just how insolvent it truly was and ii) decided not to bail it out subsequently.

* * *

As for Deutsche Bank's response perhaps the simplest and most effective one would be for the Frankfurt megabank to tell the NY Fed that perhaps its own 150x leverage is just a little more worthy of attention.

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jubber's picture

US seem to really want to piss off their long term allies, after throwing the US spy out of Germany, it may be an interesting response from Merkel

WTFUD's picture

NSAUSSA take your bases and Spyware and get the fuck off my CLOUD.

espirit's picture

O'bamas N'SAUSSA has a nice ring to it.

IndyPat's picture

Sort of like the way your ears ring when something explodes.

MsCreant's picture

Deleted it because I was so wrong. 

alexcojones's picture

Just saw a book entitled "End The Fed" at the local thrift store.

Some guy named Ron Paul wrote it.

One day people will remember that name.

Long after the SHTF

buzzsaw99's picture

...an issue plaguing many of the world's big banks: Some investors lack confidence in the integrity of their numbers.

Notice how they paint it? The numbers are crap, but the problem is a lack of confidence only according to them.

RaceToTheBottom's picture

Reality is what you make of it.....

Numbers are crap.....confidence issue

Accounting is harsh....Change Accounting

Ratios are harsh....Print money as gifts


But the bonuses must flow....

Cacete de Ouro's picture

What ever happened to German regulator BaFin's investigation of Deutsche Bank for gold market manipulation?

I guess the World Cup got in the way. But now that the summer holidays are here, it's off to the Greek beaches for the Bonn and Frankfurt chair warmers.

So it's "Tschussi "from BaFin, with a 'Back in September' sign on the door.

tony wilson's picture

any news on the german

now jewish gold.


was the gold more german compensation for the hollow cause

Cacete de Ouro's picture


"Unsere Gold-Rückführungsplan ist im Zeitplan. Unsere berühmtesten Fußball-Team hat wieder die Weltmeisterschaft Gebracht. Dies ist aus Gold, nicht wahr? Was will man mehr?"

"Our gold repatriation plan is on schedule. Our most illustrious football team has brought back the World Cup. This is made from gold, is it not? What more do you want?"

Treason Season's picture

"' ... hollow cause. "'

Does this stuff come naturally or do you have to work at it?

Sick's picture

If DB fails everything will fail.  Being of German desent, my instinct is to take responsibility for the problem, let the cards fall where they may and move on.  I do believe it is a threat based action concerning Russia but Russia is too smart to fall for all these tricks and is just waiting and watching for the US and EU to fail on their own financially, politically and militarily.

Perfecthedge's picture

Deutsche Bank will NEVER fail, because I heard one guy on TV saying that he will do ANYTHING to save the Euro.  There you have it.

If DB goes down the tube, they could always ask the new BRICS development Bank to help them out...oh wait a minute...here we go again!

NoTTD's picture

Fail, baby fail!



shouldvekilledthem's picture

Risk and a regulated entity in one sentence?

Utah_Get_Me_2's picture

This is another perfect example of how stupid the ruling elite think the general public really is. This direct threat is so transparent it's laughable.

-Sanction Russia or else Deutsche Bank and the Germany economy gets it.

-We saw you, Merkel, glad handing the BRICS leaders in the luxury box at the World Cup. If you so much as think about entertaining the idea of expanded BRICS cooperation let alone joining the BRICS new currency basket and IMF alternative, Deutsche Bank will be the cement shoes that seal the fate of your administration.


orangegeek's picture

soc gen results




i still think it will be the french that trigger before the germans

Bluntly Put's picture

2 words:

Moral Hazard.



IndyPat's picture

Another 2.

Rabid contagion.

Bonus set.

Eternal Unwind.

demoses's picture

Z Germans are starting to feel how true friendship feels like... with a friend like America you better start collecting phone numbers of your enemies -> you will need their help.

mototard's picture

"a litany of serious problems, including shoddy financial reporting, inadequate auditing and oversight and weak technology systems."

Were they talking about Bubba, the Fed or Wall Street in general?  So hard to tell the players apart these days!

John McCloy's picture

More death throes of a dying nation and it's dwindling influence brought upon by it's own hypocrisy and one which jails none of it's banking criminals and matter of fact permits them to purchase the government from the top down.

You know what they call a leader with no followers?? Just a motherfucker going for a walk..
Remember that American Government (Cartel).

SMC's picture

Steal their gold.
Monitor their communications.
Threaten their largest bank.

Perhaps it is time to consider the various ways to add an F and a G to BRICS.

At this rate the Obummer regime will successfully alienate the entire EU by mid-winter.

Colonel Klink's picture

Just add Italy and Nigeria to the list and you have F-ING BRICS!

maneco's picture

You could add Uruguay, Chile and Kenya to F-ING! :)

Colonel Klink's picture

I'm sure there are enough countries that could spell 1-800-Fuck YO.  Oh wait, that one is already taken for Zerocare.

Bernoulli's picture

Aren't they just looking for scapegoats when this MF goes belly up?

Maybe it's just a domestic election issue?

lasvegaspersona's picture

There are lots of 'vowel' nations on the planet...don't think a new acronym will be a problem...gimme an A.. Albania, Austria, Australia....gimme a B Belgium, Bulgaria, Bolivia...see...alliances are easy if you play nice...

tommylicious's picture

Rammstein said it best:  "NEIN!"


AnAnonymous's picture

Reducing the 'american' french bank story to the delivery of the ships to Russia is another easy way to divert from reality.

'Americans' do not care about the delivery of ships as the Russians are unable to put them to use. The russian thirst for weaponry is like gun ownership: it serves people who can use weapons/guns for what they are designed. Hoarding guns helps only those who do use the guns on a daily basis to expand and service their way of doing business.

The days of the USD as a reserve currency are numbered and every passing day brings closer to the demise of the USD as a reserve currency. Hollow words that fit the 'american' mindset. Platitudes that can be stated of anything that has a start and an end. The USD fits the bill.

The reality though is that the status of the USD as a reserve currency is stronger than ever. That is why 'americans' residing in the US can use it as a way to shear people all around the world, including 'americans' residing in other places like European countries.

People want the privilege of using the USD? They must pay for it. The situation is funny, because the USD enjoys a monopolistic situation and it is used to do what a monopoly is best at: squeezing people.

Yet, instead of appreciating the events as they are and see what they reveal, 'americans' prefer the fairy tale that the days of the USD as a reserve currency are numbered.

The USD as a reserve currency has never been stronger as it reveals by the use 'americans' in the US make of it.

IndyPat's picture

Though there is some truth mixed into your Moo Goo Guy Pan, there was still plenty of horseshit, melamine and cadmium too, which is par for 'chineseism'.

It reads more like....

Haters gonna hate

It ain't like we are proud of it. But your screed sounds like you're pissy because your flavor of cleptocrats hadn't perfected the scam first.
The would if they could..and as always, 'chinese' are playing catch up.

Haters gonna hate.

NoTTD's picture

How is it that US regulators can always spot this in foreign banks but cannot see it domestically?


To ask the question is to answer it.

geno-econ's picture

So where is Reggie Middleton when we need him to explain the banking situation ?  I guess he is playing with his Bit Coins

espirit's picture

I'd rather have Boris ring in on this...

Boris, calling Boris.

Pick up the courtesy phone please.

gcjohns1971's picture

It seems disingenuous at best to refuse return of German Gold and then slam the Germans for their irresponsibility.


Jackagain's picture

They don't like people who complain anout the NSA...

Goldilocks's picture

There is no such thing as money; it's all in your stupid heads!

The only thing that matters are things .... real things.   

Which one of you pipe hitin’ bitchez gonna downvote this post?

gcjohns1971's picture

How would the Euro survive without Germany?

How would Germany survive without Deutch Bank?

How would the US Fed or IMF survive a collapse of the Euro banking system?


Really, who the hell is threatening who here?

AnAnonymous's picture

The 'american' middle class have overpopulated the world.

The 'american' solution: for the 'american' middle class to survive, part of the 'american' middle class must be sacrificed so that the rest can breathe and live an 'american' middle class life.

The 'american' middle class is not to be found in countries like Zimbabwe or Vietnam, those countries contain the weak and poor types 'americans' build their success on.

The 'american' middle class is to be found in 'american' countries. The collapse of an 'american' middle class in a country in Europe means more room for the rest of the 'american' middle class in the world.

IridiumRebel's picture

The 'american' middle class have overpopulated the world

Yep.....can't have people living good lives now can we. What we need are more people in hovels taking shits on the side of the road so more of the oligarchy can have all they desire as we are lessened to the level of gutter rat like you and yours. We will be right there next to you in the trenches.

espirit's picture

Actually, cow shit huts are all the rage.

ess a /s.

Utah_Get_Me_2's picture

Let me guess.. Socialism is the answer? If challenge you to point to one historical example where centralized control, collectivism and capital controls resulted in a prosperous, free, unencumbered society. I'll wait...

buzzsaw99's picture

name one example of a pure capitalist system. I'll wait...

MsCreant's picture

Jesus buzz, stop holding your breath, you don't look so good...

gcjohns1971's picture

The United States under the Articles of Confederation, 1781-1791, and for short periods thereafter punctuated by periodic rent-seeking agreements by various industries and association that were usually short-lived.

The problem is that it is in the nature of human beings to venerate authority figures, like surrogate parents to adult people.

It is also in the nature of humans to seek unearned wealth.

The combination is deadly.