Deutsche Bank AG (DB) agreed to pay a $205 million fine to resolve allegations by New York State banking regulators that the beleaguered German lender attempted to manipulate foreign-exchange markets during a period from 2007 to 2013.
Violations included "efforts to improperly coordinate trading activity through online chat rooms, improperly sharing confidential customer information, trading aggressively to skew prices and misleading customers," the New York State Department of Financial Services said in a press release. The violations stemmed in part from a "failure to implement effective controls," according to the department.
In an e-mailed statement, Frankfurt-based Deutsche Bank said that the cost of the fine had already been accounted for in legal reserves, indicating that there should be no further losses in future earnings reports. The lender has racked up annual losses in the past three years totaling more than $10 billion, including costs to resolve the currency-trading investigations as well as separate probes into mortgage misdeeds and money-market manipulation.
"Deutsche Bank is pleased to resolve the NYDFS's investigation into historical practices relating to its FX business and that NYFDS has recognized our extensive cooperation and remediation," according to the company's statement. The state's probe is believed to be the last remaining active investigation of Deutsche Bank related to foreign-exchange trading.
At the time of the allegations, Deutsche Bank was the world's largest foreign-exchange dealer. Other banks, including the London-based Barclays Plc (BCS) and Paris-based BNP Paribas SA (BNPQY) have paid larger fines related to similar violations.
Deutsche Bank already had agreed last year to a $137 million payment to the Federal Reserve over foreign-exchange-related matters, while a judge approved a separate $190 million settlement of a class-action suit.
The latest fine comes as new CEO Christian Sewing moves to increase profitability and resolve allegations lingering from past missteps at the lender, which expanded in the 2000s to become a major player in the global investment-banking and trading businesses. Last month, Sewing announced a plan to cut as many as 7,000 jobs and slim down the company's stock-trading operations as the bank refocuses its efforts as a lender in Europe.
According to the press release from the New York State regulators, Deutsche Bank foreign-exchange traders "participated in multi-party online chat rooms where participants shared confidential information, discussed coordinating trading activity and attempted to manipulate foreign-exchange currency prices or benchmark rates."
The actions were part of an effort to stifle competition and increase profits by completing trades at the expense of customers or the wider market, the regulators alleged.
Another improper practice was known as "jamming the fix," where traders accumulated large positions and then made aggressive trades toward the close of the market session to push prices in a favorable direction, according to the state.