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Exit of Deutsche executives linked to alleged mis-sales investigation

The sudden departure of two veteran Deutsche Bank executives is linked to an ongoing investigation into the alleged improper sale of foreign exchange derivatives to corporate clients in Spain, people familiar with the matter told the Financial Times.

Germany’s largest bank on Tuesday informed staff that Louise Kitchen, head of Deutsche’s asset liquidation unit, and Jonathan Tinker, co-head of global forex, were resigning and would be leaving the bank.

The departures were announced in memos to staff seen by the Financial Times and first reported by Bloomberg. Deutsche Bank has not given the reasons for the departures, two of the many leadership changes announced on Tuesday.

People familiar with the details told the Financial Times that the resignations of Kitchen and Tinker, who both worked at Deutsche Bank for more than 15 years, were linked to Project Teal – an internal investigation into an alleged derivative abuse exchange rate that pushed some small Spanish businesses into financial difficulty and led to a series of out-of-court settlements.

The investigation is one of many compliance issues overshadowing the tenure of chief executive Christian Sewing, who has headed Deutsche Bank since April 2018 and has pledged to improve the lender’s internal controls.

However, in April, the German financial supervisor BaFin ordered Deutsche Bank to put in place its anti-money laundering safeguards at the same time as it broadened and extended the mandate of a parachuted special representative. in the bank in 2018 to monitor the lender’s progress in tightening its internal policy. controls. Deutsche said at the time that it had “significantly improved” its controls.

In March Stefan Simon, chief legal officer at Deutsche, was appointed head of the financial crime and compliance unit, areas that were previously overseen by chief risk officer Stuart Lewis, who will leave the bank in 2022. The lender subsequently appointed a new global head of financial crime.

The FT revealed in January that Deutsche was investigating whether its staff falsely sold sophisticated investment banking products to clients in violation of EU rules and then colluded with individuals within those companies to share the profits.

Two employees who were operationally in charge of potentially problematic activities have already left the bank. Now two executives who oversaw the business unit where the sales took place are also leaving. Süddeutsche Zeitung first wrote about the connection between the Teal project and departures.

Deutsche Bank declined to comment.

“We thank [Kitchen] for his contribution to the rapid establishment and success of the [Capital Release Group] for helping transform our bank and for her work over 15 years in leadership roles on the bank’s trading platforms and covering corporate and institutional clients, ”wrote Rebecca Short, Director of Transformation at Deutsche, in a note to staff.

Ram Nayak, Deutsche Global Head of Fixed Income, said in a separate email that Tinker “has played an important role in the development of our FX business, and I want to thank him for his contribution to the franchise.” .

Kitchen and Tinker did not respond to FT’s requests for comment.

The Teal Project investigation was sparked by customer complaints and revealed that Deutsche had wrongly classified corporate clients under the Mifid rules – the Markets in Financial Instruments Directive.

These require banks to separate clients by levels of financial sophistication, such as retail investor, professional investor, or counterparty i.e. another bank or financial institution.

Deutsche believes some of its staff knowingly sold inappropriate or unsuitable products to customers who may not have been able to understand and assume the risk they were taking with these positions, people said. close to the investigation. The lender is not only looking at a few isolated cases, but what appears to be a larger pattern of misconduct over several years,

One of them said the subject was “toxic” to Deutsche Bank.

Earlier this year, the lender said it had “opened an investigation into our engagement with a limited number of clients,” adding that it could not comment on the details as the investigation continued.

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