Deutsche Bank Faces Significant Fine from Germany’s Financial Regulator
Germany’s financial supervisory authority, BaFin, has imposed a fine of €23 million on Deutsche Bank, signaling ongoing regulatory challenges for the country’s largest financial institution. This penalty marks BaFin’s second highest fine ever, following a previous €40 million sanction in 2015 related to the bank’s anti-money laundering practices.
Details of the Fine
The majority of the recent €23 million fine, amounting to €14.8 million, derives from deficiencies uncovered during an internal investigation pertaining to mis-sold financial products in Spain. The issues were initially highlighted by a whistleblower in 2019.
According to the findings of Deutsche Bank’s internal inquiry, the institution had directed risky foreign exchange derivatives at corporate clients seeking to mitigate currency risk, resulting in substantial financial losses for some clients. Following the investigation, sanctions were levied against fewer than 12 employees, primarily for a lack of oversight, though a few were held accountable for intentionally taking advantage of inadequate controls.
Spanish Regulatory Actions
In a related case, Spain’s National Securities Market Commission (CNMV) fined Deutsche Bank €10 million for “very serious infringements” of both Spanish and EU regulations. The CNMV criticized the bank for its failure to adequately disclose the potential risks involved with their financial products to corporate clients. Deutsche Bank has indicated its intention to appeal this fine.
Regulatory Criticism from BaFin
On Tuesday, BaFin expressed disapproval of Deutsche Bank’s slow response to address the violations. The regulator’s statement emphasized that the bank had not established suitable organizational measures to expedite both the investigation of these legal breaches and the implementation of corrective actions. Notably, Deutsche Bank has decided against appealing BaFin’s imposed fine.
Continued Scrutiny of Risky Financial Practices
The Financial Times reported in 2023 that Deutsche Bank persisted in marketing high-risk foreign exchange derivatives to companies in Spain, even after acknowledging previous instances of mis-selling. This ongoing issue underscores the challenges facing the lender in reforming its practices.
Additional Penalties for Postbank
Furthermore, BaFin has penalized Deutsche Bank’s domestic retail division, Postbank, with fines amounting to €4.6 million for not recording client telephone conversations during investment consultations and €3.7 million for delays in processing customer switching applications.
Company’s Response
Deutsche Bank stated that it has cooperated fully with BaFin and has taken steps to rectify the issues identified in the investigation. The bank noted that the penalties have been accounted for in existing provisions, thereby posing no impact on its first-quarter profits. In a company statement, Deutsche Bank asserted, “Processes in the affected areas have been improved and controls have been strengthened.”