Deutsche Bank Fined Again, this Time over Rogue Currency Traders

Currency traders of Deutsche Bank disclosed their positions to other parties to coordinate trading tactics
Photo: Reuters, Deutsche Bank Headquarters in Frankfurt

German lender Deutsche Bank is once again on the wires with the company facing another fine. The penalty is imposed by the U.S. Federal Reserve over failure to adhere to the Vockler rule which was introduced in the aftermath of the Great Financial Crisis of 2008. Deutsche’s position is further complicated by the discovery of illicit practices used by the bank’s currency trading desk.

Deutsche Bank will pay a total of $157 million for failing to appropriately oversee its trading desks. The dealings related to the foreign exchange market orders will cost the firm $136.9 million, while the failure of compliance with the Vocker Rule adds another $19.7 million to the bill.

The top German lender has recently raised over $8.5 billion to recapitalize its operations and return on a sustainable growth path. The company’s business has been contracting for some years, after multiple legal probes, disputes and declining earnings.

Currency Traders Chat Strategies

Aside from the Federal Reserve, another authority, the New York Department of Financial Services (DFS) is also analyzing the chats between currency traders that emerged in a civil lawsuit. The U.S. Justice Department is also said to be looking into the foreign exchange trading activities of Deutsche Bank.

Traders appear to have been disclosing sensitive information to other market participants about the positions of clients of the bank. This information could then be used by the banks to hunt down stop loss orders and manipulate FX rates, particularly around the London fixing, when the currency market is typically very active.

Currency traders have been at the center of the London fixing manipulation probes, that have been largely concluded. Banks are encouraged by their regulatory bodies to apply stricter controls over their employees.

The Federal Reserve has mandated Deutsche Bank to cooperate in the investigations against employees of the bank.

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