Deutsche Bank is to be fined around $55 million (£36 million) after misstating losses on a derivatives portfolio during the financial crisis.
The German bank is alleged to have misstated its positions by at least $1.5 million, according to the Securities and Exchange Commission (SEC).
Commenting on the outcome of the investigation, Deutsche said: "The SEC acknowledged the bank's cooperation throughout the investigations and did not bring any charges against individuals in this matter. The bank does not admit or deny the charges outlined in the order."
In 2012, the Financial times reported that three ex-Deutsche employees had approached the SEC, telling them that the bank was hiding billions of dollars in losses.
Speaking about the fine, one of the ex-employees said that he was satisfied with the result – five years after complaints were originally made to the regulator.
According to complaints made in 2010 and 2011, the bank was overstating profits in a $130 portfolio of "leveraged super senior" trades. Five years previous, these had been seen as the future of credit derivatives and were designed to behave like the most senior tranche of a typical collateralised debt obligation. Deutsche became a leading operator in this market.
The ex-employees said that the bank had not correctly accounted for the "gap option". In a statement on Tuesday (May 26th), Deutsche said that it had not accounted for that risk because it "did not believe there was a reliable method for measuring the gap risk in light of the existing market conditions."
However, other banks, including Goldman Sachs, did account for it – employees and experts say this was worth billions of dollars.
When the financial crisis happened, the ex-employees say that Deutsche's income was inflated relative to other banks, giving them an advantage.
Deutsche bank claims that it did not suffer any losses and has cut its portfolio by more than 90 per cent.
In Frankfurt on Tuesday, Deutsche Bank closed at 28.13, this was 15.84 per cent below its 52-week high of 33.42 on April 14th.
StoneX Financial Ltd (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.
No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.