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German FX investigation finds actions of bad faith.

 An invest­ig­a­tion into mis-selling has found that staff acted in «bad faith» for years, push­ing smal­ler

Forex trader.

Span­ish com­pan­ies to buy highly com­plex deriv­at­ives. A Deutsche Bank probe into the mis­selling of risky for­eign exchange deriv­at­ives in Spain has found that staff acted disin­genu­ously, exploited flaws in the bank’s con­trols and broke EU rules, accord­ing to people with know­ledge of the report. One of the people said employ­ees acted in «bad faith» over the years, push­ing small and medium-sized Span­ish com­pan­ies to buy highly com­plex for­eign exchange deriv­at­ives. The products, pro­moted as safe and cheap, were meant to hedge against for­eign exchange risks.

They gen­er­ated huge profits for Deutsche but exposed cli­ents to extens­ive risk and crip­pling losses in some cases. A second per­son famil­iar with the probe described some of the Deutsche staff con­duct as «very unfor­tu­nate». The mis­con­duct, which involved a Lon­don desk of Deutsche’s invest­ment bank, as well as Span­ish oper­a­tions at its inter­na­tional private unit, spanned sev­eral years until 2019. Deutsche Bank told the FT in a state­ment that it took «appro­pri­ate action» after it reviewed «parts of our sales activ­it­ies in struc­tured FX deriv­at­ives», adding that it was «improv­ing our pro­cesses and enhan­cing our con­trols».

The products in ques­tion were types of for­eign exchange swaps called tar­geted accrual redemp­tion notes and for­wards. Deutsche pitched them as a cheaper way to hedge cur­rency risk. Small com­pan­ies were told the products were «zero premium» with no ini­tial cost, accord­ing to people famil­iar with the details. In a stable cur­rency mar­ket, the deriv­at­ives some­times benefited cli­ents.

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Comments

  1. Melvin13 February 2023 at 10:42

    It's shocking and disappointing to hear of these kinds of people working for such large institutions like Deutsche Bank. It shows a lack of control over all branches and it dilutes the brand of this bank.

    ReplyDelete
  2. Fred13 February 2023 at 14:17

    I'm curious if these Spanish clients will receive any compensation for this.

    ReplyDelete

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