The Commodity Futures Trading Commission has added to Deutsche Bank’s regulatory woes in the US, charging it with a string of swap-reporting abuses, repeated failures of supervision and a violation of a previous order.
In a civil complaint filed to the US District Court in Manhattan, the CFTC said the Frankfurt-based bank was unable to report any swap data for multiple asset classes for five days after a systems outage in April. That glitch exposed a lack of adequate business continuity plans, the regulator said, adding that Deutsche’s efforts to restore services exacerbated old problems and created new ones.
Some of these problems still persist, affecting market data available to the public, and compromising the CFTC’s ability to gauge systemic risk throughout swaps markets, the regulator added.
The action on Thursday came after the CFTC fined Deutsche $2.5m last September for various shortfalls, including failing to report swaps and neglected to correct errors in its reporting.
In a statement, Aitan Goelman, director of enforcement, said Deutsche’s “inability” to comply with its responsibilities warranted the intervention of a court-appointed monitor.
Deutsche on Thursday said it understood the CFTC’s concerns and had agreed on steps to resolve the matter. “We continue to work on enhancing our reporting systems, and we are committed to meeting all regulatory requirements,” the bank said.
Germany’s biggest bank has been in hot water with various US agencies in recent months. Last week the bank was fined $12.5m by Finra, the self-policing watchdog for the US securities industry, for failing to exercise proper controls on the information pumped out over its internal speaker system. In June the bank suffered a bigger blow, failing the annual stress test carried out by the US Federal Reserve for a second year in a row.
Such self-inflicted wounds come at a difficult time for Deutsche, which is struggling to cope with a world of lower trading volumes, tougher capital requirements and rock-bottom interest rates. Earlier this month its share price fell to €11.12 — a level not seen since the 1980s, and about one-third lower than at the depths of the financial crisis.
The Dodd-Frank reforms passed after the financial crisis required dealers to report swap derivatives positions to prevent the kind of build-up of losses that led to the $180bn bailout of American International Group. Tim Massad, CFTC chairman, has warned banks and counterparties that his agency would crack down on those that fail to make timely, complete and accurate reports.
In a speech last November, Mr Massad noted that the watchdog had gone after six other financial institutions for lapses in record-keeping and reporting.
The CFTC on Thursday said it was seeking civil monetary penalties and remedial ancillary relief.
“Unless restrained and enjoined by this court, Deutsche Bank is likely to continue to engage in the acts and practices alleged in this complaint and similar acts and practices,” it said.
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