Regulation

Deutsche Bank to Pay $55M for Hiding Losses

Deutsche Bank settles one of the last remaining cases from the financial crisis, which involved the valuation of credit default swaps.
Katie Kuehner-HebertMay 26, 2015

Deutsche Bank will pay $55 million to settle allegations by the U.S. Securities and Exchange Commission that it purposely did not disclose more than $1.5 billion in losses during late 2008 and early 2009, at the height of the financial crisis.

The SEC said that the Frankfurt-based company had underestimated certain risks by between $1.5 billion and $3.3 billion during that period, according to a Wall Street Journal story. The agency reportedly learned from a whistleblower that the bank purposely did not update the market value of certain credit default swap transactions, known as super senior trades.

In a separate statement, Deutsche Bank reportedly said that the “SEC acknowledged the bank’s cooperation throughout the investigation,” but the bank did not admit or deny the allegations, the WSJ said.

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The bank said that it did not update the transactions’ market value because it believed at the time that there was no reliable method for measuring them amid illiquid market conditions during the crisis. Moreover, it has since enhanced policies, procedures, and internal controls regarding the valuation of illiquid assets, the company said, adding that no charges have been brought against individuals in the matter.

Separately, Deutsche Bank in April paid a record $2.5 billion fine to U.S. and U.K. authorities for having tried to manipulate interbank interest rates, known as Libor.

“Investors at the bank’s shareholder meeting last week lashed out at senior management, and co-chief executive Anshu Jain in particular, for the many lawsuits and slow progress resolving them,” the WSJ wrote.