Regulator Investigates Controls at Deutsche Bank Commodities Unit
Germany’s top financial regulator recently investigated internal controls at Deutsche Bank AG’s commodities unit, according to a person familiar with the probe.
The regulator, BaFin, sent a letter to the bank outlining its findings in April, this person said. It’s not known whether the regulator found deficiencies in the bank’s processes or instructed the bank to make any changes. It is also not known what prompted the investigation.
Deutsche Bank AG said in December that it would exit most of its commodities trading business. Changes to bank regulations have made it tougher for banks to generate profits from commodities trading.
“As we announced in 2013, we significantly scaled back our commodities business, and exited entirely non-precious metals trading,” a spokesman for Deutsche Bank said Thursday. “As we have previously said, we continue to cooperate with authorities in their industrywide review of certain benchmarks and are investing to further improve our control environment.”
The commodities trading industry has come under the scrutiny of regulators recently, as part of a wider investigation into possible wrongdoing in several financial markets, including the alleged manipulation of key benchmarks.
The U.K.’s Financial Conduct Authority is conducting a review into the gold fix—a twice-daily benchmark used to price gold investments and jewelry, for instance. BaFin is also looking into rate-setting processes for gold and silver. Deutsche Bank in April pulled out of the processes for setting gold and silver benchmarks, prompting a likely overhaul of the two, similar processes.
In April, Barclays PLC was fined £26 million ($44 million) by the FCA for lax controls after one of its traders allegedly manipulated the gold fix at the expense of a client. Barclays declined to comment Thursday.
Source: WSJ
