Morning Coffee: Deutsche Bank's strangest mistake yet. The U.S. bankers who were only in it for the money
For a bank that is supposed to be on its absolutely best behaviour, Deutsche Bank has a dyspraxic-type tendency to trip itself up, with the perpetrators of the trip often being precisely those who are supposed to keep the bank upright: the compliance department.
In the latest little accident, DB's compliance team stands accused of not being entirely upfront about a strange mistake that happened in mid-January. Akin to accidentally emailing a socially aspirational friend with hundreds of other friends' telephone numbers and salary details, it seems that Deutsche somehow sent Amazon the details of 12,500 transactions belonging to its largest 500 corporate customers. Instead of immediately confessing what happened to the UK Financial Conduct Authority, DB then dithered and seemingly didn't report the issue in as timely a manner as was considered appropriate.
Coming on the back of various other compliance-related errors in the recent past, Deutsche Bank's latest mistake suggests the bank still isn't the sort of sanitary corporate citizen that might be invited to a finance finger buffet. Suspecting as much, the UK's Financial Conduct Authority has told Deutsche it wants monthly updates on how the bank is doing instead of the standard quarterly meetings. The FCA has also intimated that Deutsche might not be given permission to operate in the UK after Brexit unless it shows signs of genuine self-improvement - something which is causing consternation in Frankfurt but is likely more bluster than eventuality.
For its part, Deutsche is denying any wrongdoing (except for the original mistake) and is pointing out that it's already tripled the number of staff in its anti-financial crime division in five years and that it plans to spend €4bn on improving its controls sometime soon. This is all very laudable, but it doesn't seem to be enough. It's also worth remembering that Deutsche announced plans to combine parts of its compliance team with anti-financial crime and non-financial risk management last year, so the increased spending doesn't all appear to have been in one direction.
Britain leaves the EU on 31 December. The FCA has said Deutsche has 10 months to put its house in order if it wants to remain operational in the UK thereafter. And as with all boundaries set by sensible adults, the FCA's threat will need to be enforced if necessary if the regulator is not lose authority.
Separately, the Financial Times has asked various bankers in the U.S. to reflect on the failure of European banks to make much headway on Wall Street in the past few decades. Some of the most damning comments come from Ken Moelis, who left UBS in 2007 to go it alone.
“It’s very hard to retain the best people in the industry when your goal is to be number six,” said Moelis, adding that he went to UBS to create "something great" but that “I don’t think they wanted to be great. They wanted to be good. Some of the European banks, their mentality was, let’s just get good.”
Another unnamed 'ex-CEO of a large European bank' told the FT that the Europeans on Wall Street were seen as cash cows by their employees. “They really had nothing to bring to the table but money,” argues the former CEO of a large European bank. “Partly as a consequence, the U.S, bankers had little respect for them and felt super-entitled to rip them off.”
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