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Deutsche Bank Fined $156.6m For Alleged FX Trading Violations

The U.S. Federal Reserve is fining Deutsche Bank AG $156.6 million for having violated foreign exchange regulations, as a part of a settlement agreement. The bulk of the fine $136.9 million has been levied for not following currency trading rules.

This settlement relates to the broader investigation being carried out at a global level into several large banks for colluding to rig foreign exchange prices. According to the Federal Reserve, Deutsche bank had failed to detect that traders were using chat rooms to communicate and set up trades in order to manipulate foreign exchange rates.

An additional $19.7 million penalty is being imposed on the bank for violating the ‘Volker Rule‘ which bans banks from trading with federally insured funds. Compliance programs are mandatory under the rule but Deutsche Bank failed to set one up. Deutsche Bank is the first bank to have been fined for flouting the ‘Volker Rule‘ since its rollout in 2015.

bloomberg

In a statement, Andreas Plaesier, an analyst at M.M. Warburg said,

It’s really surprising just how many controls failed across the bank in recent years and it doesn’t cast a good light on former management.

Deutsche Bank spokeswoman Renee Calabro stated that the bank was pleased to have settled the matter. Under its agreement with the Fed, Deutsche Bank has agreed to strengthen supervision of foreign exchange trades being conducted by its traders. It will also need to submit a plan within 60 days on the improvements it will make in order to comply with the Volcker Rule.

The settlement with the Fed follows investigation by several global regulatory authorities into charges that global banks were working together to manipulate foreign exchange prices. Five other banks have to date have pled guilty. Seven banks in all have so far paid penalties amounting to over $10 billion to regulators in both the United States and Europe.

The case against Deutsche Bank was dropped by other regulators such as the Commodity Futures Trading Commission the Justice Department, and the UK’s Financial Conduct Authority.

According to an internal source, the bank is still under investigation by New York’s Department of Financial Services with regards to charges that its automated trading platform was being used to manipulate currency prices.

So far Deutsche Bank has paid out billions of dollars to settle several large cases involving financial irregularities. The latest fine will put the total sum paid out towards fines and settlements since 2008 to be $14.7 billion, the highest among European banks.


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