Deutsche Bank "Mistakenly" Sends $35 Billion Out The Door

Back in the summer of 2015, Deutsche Bank mistakenly paid $6 billion to a hedge fund client in a “fat finger” trade on its foreign exchange desk. The embarrassed bank recovered the money from the US hedge fund the next day, and quickly accused a junior member of the bank’s forex sales team of being responsible for the transfer while his boss was on holiday; as the bank further explained, instead of processing a net value, the person processed a gross figure: "That meant the trade had too many zeroes" a staffer helpfully explained.

Fast forward to today when Germany's largest bank has done it again.

According to Bloomberg, a routine payment at Deutsche Bank "went awry" (or as the article notes "was flubbed") last month when the bank with the €48 trillion in derivatives...

... mistakenly sent 28 billion euros ($35 billion) to an exchange as part of its daily derivatives margin transfers.

While the error was quickly spotted and no financial harm was suffered by the bank which has made clusterfucks into its business model, it represents a terrific case study why one should never confuse gross and net derivative exposure: as Bloomberg adds, the "errant" transfer occurred about a week before Easter as Deutsche Bank was conducting a daily collateral adjustment. The delighted - if only for a short time - recipient of the massive transfer was the Deutsche Boerse AG’s Eurex clearinghouse, in whose account the sum landed.

“This was an operational error in the movement of collateral between Deutsche Bank’s principal accounts and Deutsche Bank’s Eurex account,” Charlie Olivier, a spokesman for Deutsche Bank, wrote in an emailed statement. “The error was identified within a matter of minutes, and then rectified. We have rigorously reviewed the reasons why this error occurred and taken steps to prevent its recurrence.”

Of course, Deutsche Bank vowed the same "rigorous" review took place after the 2015 FX transfer fiasco and clearly nothing changed. Actually no, what changed is that Deutsche Bank has been a chronic underperformer, its stock crashed in 2016 to levels below the financial crisis amid speculation about its solvency, and just last week the bank's latest CEO was fired for what really amounted to incompetence.

Surely a pattern is emerging.

Indeed, as Bloomberg adds, "the episode raises fresh questions about the bank’s risk and control processes, at a time when lenders are faced with increased scrutiny from regulators. It’s another embarrassment for Deutsche Bank at a time when it is undergoing a change of leadership in the wake of its third straightannual loss."

And while the "glitch" took place during the last days of now ex-CEO John Cryan's tenure, it will surely be seen as another wrinkle for the bank's new chief executive Christian Sewing who even before this news already had a mountain to climb, as Deutsche Bank is the worst performing member of the Stoxx 600 banks index this year, with the shares having fallen 26% YTD.

Also, in light of the latest debacle, one wonders if the transfer had anything to do with the recent ouster of bank COO Kim Hammonds, who reportedly called Deutsche Bank "the most dysfunctional company" she’d ever worked for.

Finally, adding insult to injury, as we reported over the weekend Deutsche Bank was asked by the ECB to simulate a "crisis scenario" and an orderly wind-down of its trading book, making the German lender the first European bank to receive such a request from the ECB, which is reportedly using Europe’s largest investment bank as a "guinea pig" before it sends similar requests to other banks.

Then again, other European banks don't have €48.3 trillion in derivatives they would need to wind-down overnight.


Belrev cougar_w Thu, 04/19/2018 - 13:35 Permalink

They have lots of affirmative action type hires placed into decision making and managerial positions without any merit, but who give them a good defense in case a discrimation lawsuit is filed. This is German bank after all which is by default guilty of white privilege, nazis and slavery. You know the drill.

It is better to run down the bank into the ground, then be sued for not promoting next woman, or negro, or indian to a position of power.

In reply to by cougar_w

philosobilly Belrev Thu, 04/19/2018 - 15:16 Permalink

fuck finances, what about health care. next time you go for surgery and your surgeon is anything besides an anglosaxon or proper asian male will you have the guts to ask them if they got their job because they rock or because of the strenght of their skin color? i did, the man was honest- he genuinely didnt know. now thats scary. in the us alot of the full time jobs gained in the obama years were bureacrat do nothing make work jobs- guess whos 12% of the population and a full 50% of those job holders. as a person who makes their money in realestate im good i can always be prejudice against incomes, credit scores, pets, rental history, politican pursuation(precident in the courts exists) size of family etc i even go out of my way to make sure one tenant in a building has kids that way i can say no to excons. most business owners dont have this flexability. i weep for them. we live in ludicrous times my friend.

In reply to by Belrev

gregga777 Agent44 Thu, 04/19/2018 - 19:29 Permalink

DB's excuse doesn't pass even the most basic smell test. Are we really to believe that some employee sits there with a paper copy of all of their derivatives exposure and an adding machine to calculate their net derivatives exposure? And then makes transfers based on those calculations? There are no other checks and balances? If it's that easy to transfer billions of euros to external accounts I'll volunteer to work for DB for free. 


In reply to by Agent44

Honest Sam Thu, 04/19/2018 - 13:26 Permalink

I've done the same thing almost. 

I paid my gas bill 4 months in advance, not knowing that my spouse had also sent in a check for 4 months in advance.  And now we have this huge credit balance in the hundreds of dollars. 

"Judge not lest ye be judged." 

swmnguy Honest Sam Thu, 04/19/2018 - 13:58 Permalink

Oh, me too.  The other day at the drugstore I bought a pack of those Fisherman's Friend cough lozenges; the ones that taste like black licorice mixed with diesel fuel?  The clerk rang me up for $3.29 and I got distracted by something shiny behind the counter and handed her $35,000,000,000 instead!  We had a good laugh about it.

In reply to by Honest Sam

Utopia Planitia swmnguy Thu, 04/19/2018 - 22:04 Permalink

Years ago at a home/farm repair store (before the onset of Home Despot) I took a case of antifreeze to the checkout counter.  The clerk rang me up for 1 gallon, not the 8 gallons in the case.  I objected and told her I had a case, not a single gallon.  She informed me, in no uncertain terms, that I HAVE CHARGED YOU THE CORRECT AMOUNT DO NOT ARGUE WITH ME!!!  I dutifully paid her the amount she informed me was due and left.  That regional chain was out of business within the next 3 yrs.  If they had been a bank no doubt we would have all paid for the bailout.

In reply to by swmnguy

swmnguy VWAndy Thu, 04/19/2018 - 14:05 Permalink

Yes, it does.  Most people have no idea the huge sums of money that float overnight.  But consider.  A large retailer will have million of dollars to secure every night.  They don't have the shift manager of each store swing through the drive-up night deposit tray at the Farmers and Merchants State Bank on the way home each night.  They're not stocking up on free toasters and Spiderman towels to re-sell in their stores.  They put it in the overnight-duration Bond market.  That's a thing that exists, and it pays a lot more than your savings account does.

And then of course all that money washes every 24 hours or so and meanwhile it's been sliced, diced, rehypothecated and most of all, resold as something different.  And it's used as collateral.

When you need to hide the fact that you need $35,000,000,000 just for the next 8 hours, well...

In reply to by VWAndy

venturen Thu, 04/19/2018 - 13:33 Permalink

never fear...ECB is there. The financial crisis was caused by THEIR GROSS FAILURE....and yet...trillions were printed to make sure the bonuses train keep on giving!

bluskyes cougar_w Thu, 04/19/2018 - 14:13 Permalink

Besides the Bank's money, the Bank holds the Title Deeds, and the houses and hotels prior to purchase by the players. The Bank pays salaries and bonuses. It sells and auctions properties and hands out the proper Title Deed cards when purchased by a player, it also sells houses and hotels to the players and loans money when required on mortgages. The Bank collects all taxes, fines, loans and interest, and the price of all properties which it sells and auctions. The Bank never goes "broke". If the Bank runs out of money, the Banker may issue as much as needed by writing on any ordinary paper.

In reply to by cougar_w

gregga777 Agent P Thu, 04/19/2018 - 19:01 Permalink

Bank Error in Your Favor  

Collect $35 Billion  

Advance to Go

  • Bank Error in Your Favor  
  • Collect $35 Billion  
  • Transfer funds quickly and split to a non-extradition treaty country. 

Even if you have to bribe the local dictator with 90% of your loot you'll still be you ahead of where you started.



In reply to by Agent P