Tags: FT | Deutsche | Bank | Losses

FT: Deutsche Bank Said to Hide $12 Billion in Losses

Wednesday, 05 Dec 2012 06:13 PM

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Global financial giant Deutsche Bank's books hid $12 billion in paper losses run up during the financial crisis four years ago, three former employees told U.S. regulators, the Financial Times is reporting.

Had the bank accounted for the losses made on $130 million in derivates operations, the bank's capital levels could have dipped precariously low and may have prompted the bank to seek a bailout.

"The three complaints, made to regulators including the U.S. Securities and Exchange Commission, claim that Deutsche misvalued a giant position in derivatives structures known as leveraged super senior trades, according to people familiar with the complaints," the FT reported.

Deutsche, meanwhile, said the news wasn't new and added the allegations were unfounded.

"Deutsche said in a statement that the allegations were more than two and a half years old and were publicly reported in June 2011. It added that they had been the subject of 'a careful and thorough investigation'', and were 'wholly unfounded,'" the Financial Times added.

Deutsche added that investigation revealed that the allegations "stem from people without personal knowledge of, or responsibility for, key facts and information" and promised "to continue to co-operate fully with the SEC’s investigation of this matter."

Last November, German lawmakers questioned Deutsche Bank about is role in the scandal in which global financial institutions allegedly manipulated the London Interbank Offered Rate (Libor), an interest rates used by banks when lending to one another.

Banks worldwide have been probed from keeping the rate artificially low to profit on trades and water down borrowing costs during the 2007-2009 financial crisis.

Afterwards, lawmakers called for tighter financial controls.

"There has to be much stronger controls. Here we have another example where the freedom of the markets was abused," said Klaus-Peter Flosbach of the CDU political party, according to Reuters.

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