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Spare the Rod and Spoil the Banker
NY Fed Slaps Down Deutsche Bank for Sloppy Bookkeeping

In a letter leaked yesterday, the Federal Reserve Bank of New York accused the German financial giant of sloppy bookkeeping, and ordered it to clean up its act. The Wall Street Journal reports:

An examination by the Federal Reserve Bank of New York found that Deutsche Bank AG’s giant U.S. operations suffer from a litany of serious financial-reporting problems that the lender has known about for years but not fixed, according to documents reviewed by The Wall Street Journal.

In a letter to Deutsche Bank executives in December, a senior official with the New York Fed wrote that reports produced by some of the bank’s U.S. arms “are of 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 shortcomings amount to a “systemic breakdown” and “expose the firm to significant operational risk and misstated regulatory reports,” said the letter from Daniel Muccia, a New York Fed senior vice president responsible for supervising Deutsche Bank. […]

The letter, which hasn’t been previously reported, ordered senior Deutsche Bank executives to ensure steps were taken to fix the problems. It also said the bank might have to restate some of the financial data it has submitted to regulators.

If the flagship bank of the German financial system is a poorly-managed, amateur-hour operation, at least as far as its U.S. operations go, what does that tell us about the state of European banking more generally? And what does that say about the regulation of banking over the past twenty years in both the U.S. and the EU?

At a minimum, it says we’ve still got a long way ago in the clean-up of the banking industry.

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  • vepxistqaosani

    If the Germans — the Germans! — can’t write a report to American standards, then there is probably something wrong with American standards. German DNA is fundamentally bureaucratic — any German should be able to out-report any American in his sleep.

    (Disclosure: An American, I worked for several years for a German firm.)

    • Andrew Allison

      Or, as several recent cases (not just foreign banks) have demonstrated, there’s a culture of obfuscation if not outright criminality. This will continue until the regulators do more that issue, “please stop doing this” wrist-slaps.

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