Update: More international investigators are asking troubling questions about Deutsche's involvement with the Danske scandal. The latest is BaFin, the German financial markets regulator, which has asked the bank for more information about its correspondent banking activities, according to Reuters.
German financial watchdog Bafin has asked Deutsche Bank (DBKGn.DE) to supply information on its dealings with Danske Bank, which is ensnarled in money laundering allegations, a source close to the matter said on Tuesday.
After a fast evaluation of the data, Bafin will decide whether to launch a formal probe into Deutsche Bank, the source added.
Deutsche Bank and Bafin declined to comment.
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The situation for Deutsche Bank investors is going from bad to worse, as shares of the largest bank in Europe have now erased half their value since the beginning of the year over concerns of the bank's possible role in enabling Danske Bank to possible launder more than $200 billion in suspicious money through the Danish lender's tiny Estonian branch.
DB shares dropped as much as 6% in Frankfurt, the largest one-day drop since May 31. A Danske whistleblower said during testimony before the Danish Parliament that a large European lender (which sources identified as Deutsche Bank) had cleared some $150 billion of the suspicious money before severing its relationship with the Estonian branch in 2015 (two years after JPM is believed to have severed its own clearing relationship during a "de-risking" of its dollar-clearing business).
DB shares were headed to an all-time lowest close in recent trade, extending their YTD drop to 48% from their January highs. DB shares were down 3.1% in recent trade, compared with a 1.7% drop in the Stoxx 600 Banks Index.
To be clear, Deutsche Bank isn't a target of the DOJ investigation, or any investigation (at least not that we know of). But given the recent bloodletting across markets, even the slightest negative news could be enough to harm a company's shares.
"In the current environment, the slightest negative news is enough to make people leave risk assets, especially regarding sensible topics like money laundering," aid Andreas Meyer, portfolio manager at Aramea Asset Management.
As investigators question the correspondent banks that helped Danske move its clients money into the Western financial system, fears are growing that, instead of being treated as unwitting dupes, banks like JPM and DB could be prosecuted as accomplices in what has become the largest money laundering scandal in European history.