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Deutsche Bank may have sold foreign currency derivatives to more than 50 companies in Spain, suggesting that the scope of a scandal that has already caused the departure of two senior bankers is wider than previously thought, according to people. familiar with the subject.
Germany’s largest bank last year launched an internal probe after customers complained about selling complex derivatives they didn’t understand.
The investigation, known within Deutsche Bank as Project Teal, was first revealed by the Financial Times earlier this year. At the time, the bank said it was affected by “a limited number of customers”.
Now, the bank is examining the cases of between 50 and 100 potentially involved companies, according to people familiar with the matter, although it is unclear how many suffered financial losses.
J García-Carrión, the largest exporter of wine in Europe, received more than 10 million euros from Deutsche Bank to resolve a dispute over the losses suffered by the Spanish company, reported the FT last month.
Bloomberg reported for the first time the scope of the Bloomberg probe, which said that Palladium Group, one of the largest hotel chains in Spain, based in Ibiza, was also selling bad currency products and evaluating the your options.
“We can confirm that we have suffered a situation similar to that of J García-Carrión and that we are in a pre-litigation process in London,” Palladium said, without specifying the extent of the losses taken or the number of trades involved.
In a statement, Deutsche confirmed that an investigation into possible undue sales was underway, but declined to comment on specific cases. “We follow any test and diligently look for any similar potential activity,” he added.
Project Teal has focused on the sale of hedges, swaps, derivatives and other complex financial products. Forex derivatives were presented as a cheaper way to cover currency exposure than traditional exchange rate insurance.
According to people familiar with the matter, the investigation found that corporate customers had been incorrectly classified under the Financial Instruments Markets Directive (Mifid), an EU rule that requires banks to separate customers according to their level. of financial sophistication.
The FT reported last month that the departures of two veteran Deutsche Bank executives were linked to the scandal. The lender announced in early June that Louise Kitchen, head of Deutsche’s asset settlement unit, and Jonathan Tinker, co-chair of international currencies, would leave and leave the bank.
Two operators who were operationally in charge of the problematic activities have already left the bank.
Deutsche Bank is not the only lender that stands out for its currency selling practices. J García-Carrión is also in a legal battle with Goldman Sachs in London’s High Court for losses of $ 6.2 million related to exotic currency derivatives.
Separately, JGC has alleged that the French BNP improperly carried out foreign exchange transactions worth billions of euros that resulted in losses of tens of millions. BNP has said it is complying with all regulatory obligations on the sale of derivatives and foreign exchange instruments.
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