Deutsche Bank AG became the latest foreign bank to come under scrutiny in the US, after a letter from December emerged, showing the New York Fed expressed concern with the banks regulatory reporting.
“The size and breadth of errors strongly suggest that the firm’s entire U.S. regulatory reporting structure requires wide-ranging remedial action,” Daniel Muccia, a New York Fed senior vice president who supervises Deutsche Bank, wrote in the letter last December, according to the Wall Street Journal.
Mr. Muccia, boasting 40 years of bank regulation experience, clarified that the wrongdoings extend from data-entry errors to miscalculation of loans risks, adding that the company had misclassified the risk values on 20% of its loans.
More importantly, the issues date back at a decade, Mr. Muccia said. “Most concerning is the fact that although the root causes of these errors were not eliminated, prior supervisory issues were considered remediated and closed by senior management.”
“This seems to be a prelude for more trouble in the United States, making investors nervous,” Kepler Cheuvreux analyst Dirk Becker said for Rueters. “Theres a lot of bashing of foreign banks to this, as the U.S. tries to squeeze fines out of them.”
Deutsche Banks US unit, whose assets are valued at some $600 billion, more than 25% of the companys global value, was recently rebuked over other issues. The bank raised €8.5 billion of new capital in June in a bid to secure a required higher capital requirement for foreign banks in the US. Furthermore, the company is investing heavily in compliance and risk and technology staff, spending as much as $1.35 billion globally.
“We have been working diligently to further strengthen our systems and controls and are committed to being best in class,” Michele Allison, spokeswoman for Deutsche Bank in New York said on Tuesday.
Deutsche Bank is only the latest in a number of banks to be snubbed by the US. Barclays had a lawsuit filed against its New York-based US unit, over allegations of misrepresenting risks for investors. The UK-based bank has since opened a compliance school, in a bid to improve scandal-ridden image, while Bank of America was forced to withdraw a proposal to buy back shares, after it also found errors in how it was calculating capital levels.
Deutsche Bank AG shares traded at €26.48, down 0.66% at 12:53 GMT, while marking a one-year decrease of 21.58%. According to information published by the Financial Times, 32 analysts offering 12 month price targets for Deutsche Bank AG have a median target of 32.46, with a high estimate of 59.13 and a low estimate of 24.00. The median estimate represents a 21.79% increase from the last price of 26.66
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