The Federal Reserve Bank of New York has found serious problems in Deutsche Bank’s U.S. operations, including poor financial reporting, weak technology and inadequate auditing and oversight.
A source told Reuters Wednesday that a senior official with the New York Fed said in a letter last December to the German bank’s executives that that financial reports produced by some of the bank’s U.S. divisions were “low quality, inaccurate and unreliable.”
“The size and breadth of errors strongly suggest that the firm’s entire U.S. regulatory reporting structure requires wide-ranging remedial action,” the letter, first reported by the Wall Street Journal, said.
“The size and breadth of errors strongly suggest that the firm’s entire U.S. regulatory reporting structure requires wide-ranging remedial action,” said Daniel Muccia, a New York Fed senior vice president who supervises Deutsche Bank in the December letter, according to the WSJ. The letter said the company also had not made progress toward fixing lapses identified previously.
Michele Allison, a spokeswoman for Deutsche Bank in New York, said in a statement that the bank “has been working diligently to further strengthen our systems and controls and are committed to being best in class.”
Deutsche Bank said it’s investing 1 billion euros ($1.4 billion) in that effort and assigned 1,300 people to the program.
Germany’s largest bank has been a target of U.S. regulatory scrutiny over several issues, including investigations emanating from the financial crisis and criticism that it is has too little of a capital cushion to protect against potential losses
A U.S. Senate committee this week accused Deutsche, along with rival Barclays, of helping hedge fund clients avoid taxes and is also under investigation by U.S. authorities over alleged sanctions violations.
Julie DiMauro is the executive editor of FCPA Blog and can be reached here.