The Federal Reserve Bank of New York has slammed Deutsche Bank for a series of financial reporting problems that have plagued the firm for years.
In a letter addressed to the German bank in December 2013—first reported by the Wall Street Journal on Tuesday—the officials said the regulatory reports were “of low quality, inaccurate, and unreliable.”
“The size and breadth of errors strongly suggest that the firm’s entire US regulatory reporting structure requires wide-ranging remedial action,” the letter said. “We also concluded that no progress was made in remediating prior supervisory concerns [in 2007] as the firm’s US operations regulatory reporting process continues to be fragmented and suffers from weak or inadequate internal controls.”
More specifically, Daniel Muccia, a New York Fed senior vice president charged with supervising Deutsche Bank, said the bank must pay immediate attention to inadequate governance, “fragmented” reporting technology infrastructure, lack of data integrity, poor accountability framework, and ineffective compliance and internal audit functions.
“The limitations of the firm’s information technology systems necessitate excessive manual intervention, which expose the firm to significant operational risk and misstated regulatory reports,” Muccia said.
“The size and breath of errors strongly suggest that the firm’s entire US regulatory reporting structure requires wide-ranging remedial action,” the Federal Reserve Bank of New York said.
According to the letter, Deutsche Bank had suffered from the same issues in regulatory reporting for over a decade. However, despite repeated prodding, the bank “failed to produce sustainable solutions,” the New York Fed said.
The most recent attempt to address reporting issues—set up by Deutsche Bank finance chief Stefan Krause—was not comprehensive, Muccia said. Launched in 2012, the firm’s Bank Regulatory Reporting Program was limited in scope and was unable to tackle specific issues pointed out by the regulators.
“While these changes are encouraging, we remind management that in the interim effective compensating controls designed to produce high quality, accurate regulatory reports must be put in place,” the letter said.
Deutsche Bank said it has plans to bolster its reporting technologies in response to the criticisms.
“We have been working diligently to further strengthen our systems and controls and are committed to being best in class,” the firm’s spokesperson said. “We are investing €1 billion as part of this effort, and we have appointed 1,300 colleagues to focus on it as part of a dedicated program.”
The new appointments include 500 compliance, risk, and technology employees.
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