FRANKFURT (Dec 7): Deutsche Bank AG appeared to win the support of a high-ranking central bank official on Thursday, who said the kind of business that prompted raids at Germany’s largest lender is largely a thing of the past.
The comments come as Deutsche Bank officials try to contain the fallout from two recent money-laundering probes that pushed its shares to new lows. Its Frankfurt headquarters were searched by police last week, days after it was drawn deeper into a separate money laundering scandal at Danske Bank A/S. Internal probes have found no wrongdoing, a person familiar with the matter said Thursday.
“The most recent events represent the lagged effects of previous business practices and organizational weaknesses,” Joachim Wuermeling, who sits on the European Central Bank’s supervisory board, the top banking watchdog, said when asked by Bloomberg about the raids. “In our role as supervisors, we stick to facts and figures. And by that, I don’t mean the number of police cars, but capital requirements, risk management and business models.”
Wuermeling, who is also a board member of Germany’s central bank, said he couldn’t comment on a specific investigation or company. Still, in what may have been a veiled reference to Deutsche Bank, Wuermeling said there were "positive developments in the German banking landscape over the past few months" and supervisors give lenders credit when they make progress.
Deutsche Bank shares rose 1.2% at 9:33 a.m. in Frankfurt trading. The stock hit fresh lows after the raids, which were related to the Panama Papers and involved 170 law enforcement officials at several offices. TV footage showed police cars in front of bank’s twin towers in Frankfurt.
TV footage can make markets “jittery,” and that’s a reason for concern, Wuermeling said.
The noise threatens to undermine efforts by Chief Executive Officer Christian Sewing to win back clients after several botched attempts over the past years to turn around the largest German lender. Sewing has said the bank conducted its own investigation of the Panama Papers in cooperation with supervisors when they were published in 2016 and had considered the matter to be closed.
The bank also defended its role in the Danske money laundering scandal, saying the responsibility for vetting clients lay with the Danish firm. Danske Bank has said that some US$230 billion of possibly illicit client money was funneled through its branches, mostly at its small Estonian operation. Much of that money went to a unit of Deutsche Bank, which served as a correspondent bank.
For now, Deutsche Bank doesn’t plan to put more money aside for the two cases after internal reviews found no wrongdoing, according to a person familiar with the matter. Two people singled out by prosecutors in the raids are still working at the bank and are in good standing, the person said, asking not to be identified in discussing internal deliberations.
Sewing has continued a push to improve controls since taking over in April. That same month he appointed a new chief operating officer, Frank Kuhnke, whose responsibilities include improving Deutsche Bank’s procedures in vetting clients.
Other regulators have also said they appreciate the efforts of banks to clean up their act. Daniele Nouy, who leads the ECB’s supervisory board, said at a conference on Wednesday in Frankfurt that if banks “go on with their efforts, they will see the sun at the end of the tunnel.”
At the Bundesbank, Wuermeling says, “experience since the financial crisis has shown that even large institutions are capable of resolutely changing tack. But this takes time.”