Pre-emptive admission of foul play? Deutsche Bank sets aside $2.7 billion for FX fixing fines


The ongoing and extremely high profile enquiry by international financial markets regulators and government departments into the alleged manipulation of FX rates by some of the world’s largest interbank FX dealers remains unresolved, however yesterday it was revealed that Deutsche Bank, the world’s second largest FX dealer, has set aside a substantial sum in order to pay potential fines and settlements.

Deutsche Bank has allocated approximately $2.7 billion in legal provisions in readiness for a series of fines and settlements that could be levied on the financial institution should the courts find not in its favor.

According to a report yesterday by Reuters, the bank has not specified which risks or potential penalties have been accounted for with these provisions, however the firm did send a statement to Reuters explaining that “Our investigations into trading in FX markets are ongoing and, as we have previously said, as part of those investigations we are reviewing trading in emerging market currencies.”

The decision to set aside the funds for this purpose has come very shortly after the retirement of the company’s London-based Head of eFX, Robert Mandeno just one year after his return to London from overseas postings with the bank.

In setting aside restitution provision and funds for allocation to potential penalties, the resounding question would surely be raised as to whether this demonstrates culpability and that this is one banking institution among a long list of others embroiled in the allegations which is going to be the first to put its metaphorical hand up and make an admission, therefore ending the extremely costly and time-consuming investigation, or if the accountants are simply taking prudent measures and ensuring that funds are in place to account for all eventualities.

Given the bank’s pledge of cooperation with the authorities, plus its active stance in suspending key employees within its FX trading desk, Deutsche Bank may be in a position to make an admission, and bearing in mind the series of civil lawsuits that are angled at most of the largest interbank dealers, it may be a corporate decision to own up, pay the fines and take the potential discounts for cooperating with the authorities, therefore moving on with business and having cut the potential cost, regardless of whether the bank is implicated or not.

With almost a year having passed since the initial allegations were made against a string of large FX dealers, the cost is ever increasing and the will of government departments to get to the very bottom of it, including Britain having handed the baton to Lord Grabiner who is charged with investigating the entire probe from the Bank of England downwards, it is perhaps inevitable that one major corporate entity is likely to take steps to put an end to the entire matter, whether implicated or not.

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Pre-emptive admission of foul play? Deutsche Bank sets aside $2.7 billion for FX fixing fines

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