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Deutsche Bank will pay a combined $156.6m in civil penalties in two separate enforcement actions brought by the Federal Reserve, one of which deals with its oversight of foreign-exchange traders and another dealing with its compliance programme for the Volcker Rule, which generally prohibits banks from engaging in proprietary trading.
Fed enforcers said they found deficiencies in DB’s oversight and internal controls regarding FX traders buying and selling US dollars and foreign currencies both for the bank’s own accounts and on customers’ behalf. The central bank said that DB failed to detect and address its traders’ use of electronic chatrooms to discuss their positions with competitors.
As part of the order, DB will be required to improve its senior management oversight and controls relating to FX trading. It will also require the bank to cooperate in investigations of individuals involved in the FX trading conduct and forbids it from re-hiring individuals fired as a result.
The second enforcement action deals with “gaps in key aspects” of its compliance programme for the Volcker Rule, according to the Fed, which said DB failed to adequately conduct required analyses regarding permitted market-making activities. DB will be required to improve senior management oversight and controls related to compliance with that rule.
DB said in a statement that it was pleased to resolve the matters with the Fed.
The penalties are the latest signs of progress for John Cryan, DBs chief executive, who has made shrinking the German bank’s mountain of legal woes stemming from past practices and actions into one of his top priorities.
DB said last month that US prosecutors had closed a criminal investigation into whether its foreign-exchange activities had breached federal laws. The US Commodity Futures Trading Commission ended its investigation last October.
The FX portion of the DB penalty comes to $136.9m, the Fed said. In 2015, the Fed announced a total of $1.8bn in penalties against six major banks regarding FX market practices, including $342m in fines each against UBS, Barclays, Citigroup and JPMorgan Chase; $274m for Royal Bank of Scotland and $205m for Bank of America.