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Deutsche Bank’s Spanish mis-selling scandal widens

Deutsche Bank may have mistakenly sold forex derivatives to more than 50 companies in Spain, and according to people familiar with the matter, the range of scandals that already led to the exit of two senior bankers was previously It suggests that it is wider than it was thought.

Germany’s largest bank launched an internal investigation last year after complaining that it sold a complex derivative product that its clients couldn’t understand.

A study known within Deutsche Bank as Project Teal was first revealed by the Financial Times earlier this year. At that time, banks said that “a limited number of customers” were affected.

The number of companies that have suffered financial losses is unknown, but banks are currently investigating cases of 50 to 100 companies that may be involved, according to people familiar with the matter.

J García-Carrión, Europe’s largest wine exporter, has received over € 10 million from Deutsche Bank to resolve the dispute over the losses suffered by Spanish companies. FT reported last month..

The expansion of the scope of the study was first reported Thursday by Bloomberg that the Palladium Group, based in Ibiza, one of Spain’s largest hotel chains, was also valuing the option of misselling currency products.

“We can see that we are suffering from a situation similar to J Garcia Carion and are in the pre-litigation process in London,” Palladium identified the extent of the alleged losses and the number of transactions involved. Said without.

In a statement, Deutsche confirmed that an investigation into potential mis-sale was underway, but refused to comment on certain cases. “We will follow up on the evidence and eagerly look for similar potential activities,” he added.

Project Teal has focused on selling hedges, swaps, derivatives and other complex financial products. Forex derivatives have been marketed as a cheaper way to hedge currency exposures than traditional exchange rate insurance.

According to people familiar with the matter, research has shown that corporate customers are misclassified in the markets of the Financial Instruments Directive (Mifid), an EU regulation that requires banks to segregate customers according to their financial sophistication. It became clear that it was.

Last month, FT reported that the resignation of two veteran Deutsche Bank executives was related to the scandal. Lenders announced in early June that both Louise Kitchen, head of asset consolidation in Germany and Jonathan Tinker, co-head of global forex, would resign and leave the bank.

The two traders who were in charge of the problematic activity have already left the bank.

Deutsche Bank is not the only lender to spotlight foreign exchange sales practices. J García-Carrión is also in a court battle with Goldman Sachs in the London High Court over a loss of over $ 6.2 million associated with exotic currency derivatives.

Separately, JGC claims that the French BNP has incurred tens of millions of losses due to improper trading of billions of euros worth of currencies. BNP states that it complies with all regulatory obligations regarding the sale of derivatives and foreign exchange products.

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