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'Deutsche Bank failed to recognise $12 bn losses'

Last Updated: Thursday, December 6, 2012 - 19:06

London: Global banking major Deutsche Bank allegedly did not recognise up to USD 12 billion of paper losses during the financial crisis, that helped it to stave off a government bailout, says a media report.

Anshu Jain, an Indian-origin, is currently Deutsche Bank's co-chairman. The other co-chairman is Jurgen Fitschen.

British daily 'Financial Times' has reported that Deutsche Bank allegedly "failed" to recognise up to USD 12 billion of paper losses during the financial crisis, helping the bank avoid a government bailout.

In a statement, Deutsche Bank said the allegations of financial misstatements are "wholly unfounded".

The Financial Times report cited former bank employees' allegations in complaints to US regulators.

"The three complaints, made to regulators including the US Securities and Exchange Commission, claim that Deutsche misvalued a giant position in derivatives structures known as leveraged super senior trades, according to people familiar with the complaints," the daily said.

According to the report, all three alleged that if Deutsche had accounted properly for its positions - worth USD 130 billion on a notional level - its capital would have fallen to dangerous levels during the financial crisis and it might have required a government bailout to survive.

"Instead, they allege, the bank's traders - with the knowledge of senior executives ?- avoided recording 'mark-to-market', or paper losses during the unprecedented turmoil in credit markets in 2007-2009," the report noted.

Two of the former employees have alleged that Deutsche mismarked the value of insurance provided in 2009 by Warren Buffett's Berkshire Hathaway on some of the positions, it said.

Reacting to the report, the bank said: "The allegations of financial misstatements, which are more than two and one-half years old and were publicly reported in June 2011, have been the subject of a careful and thorough investigation, and they are wholly unfounded".

According to the statement, the investigation revealed that these allegations stem from people without personal knowledge of, or responsibility for, key facts and information.

"We have and will continue to co-operate fully with the SEC's investigation of this matter. The valuations and financial reporting were proper, and a significant portion of these positions were subsequently unwound in an orderly sale," Deutsche Bank said.

Meanwhile, Financial Times said the complaints were made at different times in 2010 and 2011 independently of each other. "Two of the former Deutsche employees have alleged they were pushed out of the bank as a result of reporting their concerns internally," the daily said.


First Published: Thursday, December 6, 2012 - 15:44
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