New York Fed Asked Deutsche Bank To Clean Up US Operations: Report

International Business Times

Published Jul 23, 2014 05:34AM ET

Updated Jul 23, 2014 05:45AM ET

New York Fed Asked Deutsche Bank To Clean Up US Operations: Report

By Avaneesh Pandey - The Federal Reserve Bank of New York found several deficiencies in the way German lender Deutsche Bank's (NYSE:DB) U.S. unit was reporting its financial data, which, according to a Wall Street Journal report Tuesday, the company had known for years but failed to act upon.

In a letter written to the bank on Dec. 11, 2013, and cited by the Journal, the New York Fed stated that regulatory reports provided by the bank’s U.S. divisions were of “low quality, inaccurate and unreliable,” adding that despite the “size and breadth” of the errors and the Fed's instruction to overhaul the firm’s entire U.S. regulatory reporting structure, “no progress was made in remediating prior supervisory concerns.”

The letter said that the banking giant's regulatory reporting process in the U.S. was fragmented, and suffered from weak and inadequate internal controls. The Fed also added that the shortcomings in the bank, which were the result of a “systemic breakdown,” were further compounded by a lack of adequate auditing and oversight, and “longstanding weaknesses” in the firm’s information-technology infrastructure. 

The New York Fed, which has regulatory powers over banks in the U.S. and can restrict their activities, stated in the letter that, since 2002, when it first voiced its concerns over Deutsche Bank’s regulatory reporting framework, “the firm failed to produce sustainable solutions to addressing the weakness in the regulatory reporting process or to improve the quality of data.”

According to the Journal, even before the letter was written in December, Fed officials had described the bank's reporting as “the worst among its peers.”