Deutsche Bank’s Risk Systems in Question After Accidental €28b Transfer

The lender is calling it an ‘operational error’, intending to make a much smaller transfer instead.

Accidents happen, though when they amount to billions, there is typically a higher level of scrutiny involved. This was indeed the case after Deutsche Bank sent $34.5 billion (28.0 billion euros) in error to an account at Deutsche Boerse Eurex late last month. The lender is calling it an ‘operational error’, intending to make a much smaller transfer instead, per an FT report.

The error once again calls into question Deutsche Bank’s operational prowess and competency. Back in 2015, a junior trader at the lender accidentally sent $6.0 billion in error. In this particular instance, the junior member of Deutsche Bank’s FX sales team mistakenly processed a trade to a hedge fund client that utilized a gross figure rather than a net value – what this amounted to was a number far more than its original value, culminating in a trade of $6.0 billion.

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No financial loss to Deutsche Bank but questions remain

In the latest instance back in March 2018, an ‘operational error’ was the culprit for the bank’s part. This led the lender to release a statement explaining the circumstances: “This was an operational error in the movement of collateral between Deutsche Bank’s principal accounts and Deutsche Bank‘s Eurex account. The error was identified within a matter of minutes, and then rectified. We have rigorously reviewed the reasons why this error occurred and taken steps to prevent its recurrence.”

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The development is unwelcome news for Deutsche Bank which has already been in the midst of a transformation. With the departure of John Cryan earlier this month, many other senior Deutsche Bank executives have parted ways with the lender, including Deutsche’s chief operating office Kim Hammonds. Hammonds had been tasked with improving the lender’s IT systems framework.

Thankfully for Deutsche Bank’s part, no financial loss will be incurred following the 28.0 billion snafu. Instead, this does once again call into question the competency of Deutsche Bank’s risk management systems. Previous fines have also addressed this vulnerability, though operational errors of this magnitude give little confidence that efforts to date have been successful.

It will be up to new incoming leadership to install and fix Deutsche Bank’s risk systems as well as clean up its image. Right now, investors are looking for leadership and stability.

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