the The Federal Reserve said in private Deutsche Bank AG that its compliance programs are not until snuff, signaling that the scandal-ridden bank is not respecting a number of agreements with US regulators, according to people familiar with the matter.
The recent Fed warning came in an annual regulatory assessment that said Deutsche Bank had failed to improve its risk management practices despite being under confidential contract with the central bank to resolve the issues, said people. The assessment letter urges the executives of the German bank to prepare for possible sanctions, including the possibility of a significant fine, a person briefed on the matter said.
The Fed’s latest warning is a setback for CEO Christian Sewing, who has worked diligently to mend Deutsche Bank’s relationship with banking supervisors after a tumultuous period in which the lender stumbled from crisis to crisis. other. He now has a new hurdle to overcome – and it’s probably a big hurdle.
Read more: Deutsche Bank’s days of dysfunction are finally receding under the seam
Deutsche Bank spokesman Dylan Riddle said the company is not commenting on any communication with regulators. A Fed spokesperson also declined to comment.
Deutsche Bank has had multiple run-ins with US regulators, including currency violations and links to money laundering cases. The lender has also been the subject of numerous Fed orders on how the company manages risk, and the company’s efforts to revise its controls have failed to convince the agency that the bank’s problems are behind it, people said.
In a move that showed the company is focusing on compliance issues, Deutsche Bank last week elevated Joe Salama, who was General Counsel for the Americas, to the position of global head of financial crime and financial crime. group money laundering. He succeeds Stephan Wilken, in office since October 2018.
While talks with the Fed over Deutsche Bank’s continued missteps are still in their infancy, the bank has faced similar disputes with the agency in recent years and has been fined. The penalties include a $ 137 million settlement for allegations that traders rigged currency benchmarks and a $ 41 million penalty for money laundering vulnerabilities.
Despite the Fed’s scrutiny, there are signs that Deutsche Bank has improved its risk management, at least in some areas. The company was born out of the March collapse Archegos Capital Management is unscathed, while other banks that have done business with Bill Hwang’s family office have lost more than $ 10 billion in total.
(Updates with appointment of Salama in the sixth paragraph)