Deutsche Bank has an integrity problem.
The German bank giant has come under fire from the Federal Reserve Bank of New York, which dinged the firm for a host of serious accounting, data and compliance problems.
“We have concluded that the regulatory reports provided by DB are of low quality, inaccurate and unreliable,” the Fed said in a December letter, which was first reported by the Wall Street Journal Tuesday.
The most pressing issues were ones that managers already knew about, according to the letter sent by Daniel Muccia, a New York Fed senior VP who oversees foreign banks.
They include “inadequate” reporting infrastructure and monitoring function, poor training, few people who are accountable for compliance policies and data riddled with errors.
“We have been working diligently to further strengthen our systems and controls and are committed to being best in class,” said Michele Allison, a Deutsche Bank spokeswoman. “As announced in 2013, we are investing 1 billion [euros] as part of this effort, and we have appointed 1,300 colleagues to focus on it as part of a dedicated program.”
Before the credit crisis, Deutsche Bank put together and sold billions in mortgage debt that its own traders thought was too risky, eventually losing money in the transactions and contributing to the global financial crisis.
Deutsche Bank “has not developed a formal Accountability Policy and governance structure that clearly articulates roles and responsibilities for all areas responsible for the integrity of regulatory reports,” according to Muccia’s letter.
The problem has persisted since at least 2002, according to the letter, when the regulator “highlighted significant weaknesses in the firm’s regulatory reporting framework.”
Earlier this year, the bank’s head of compliance and government and regulatory affairs, Andrew Procter, left the bank for the London law firm Herbert Smith Freehills.
Deutsche Bank is facing a number of probes from US and foreign authorities into allegations that traders rigged interest rates and currency prices.
Eric Pajonk, a New York Fed spokesman, declined to comment.