Tomorrow morning, Anshu Jain will start his new job as co-CEO of Deutsche Bank. Despite having previously overseen operations that produce 90 percent of the firm’s profits in any given quarter, sitting on the management committee, and generally being considered a “star” both within the company and among those who follow his work, chief executive officer is a title no one thought AJ would be given if he remained at DB, because 1) people back in Germany don’t like that he’s an investment banker and 2) “In Germany, no one can imagine an Indian working in London who does not speak German being CEO of Deutsche Bank.” To the haters’ chagrin, though, that’s exactly what’s about to happen. And if they want to continue bitching about it, they can be Jain’s guest– their insults go in one ear and out the other. Read more »
Bloomberg has this sort of surreal article today about Deutsche Bank basically quoting a bunch of people saying “we are way way too big to fail and it is awesome.” Like:
Banking consolidation “sadly” will be “one of the many potential unintended consequences of regulation,” [co-CEO-in-waiting-whatevs Anshu] Jain said in a Bloomberg Television interview on Jan. 26. When asked about the systemic risks posed by bigger banks, Jain said that “you have the tradeoffs of too-big-to-fail on the one side and the benefits of diversification on the other.”
So on the one side, if we screw up we’ll be saved by diversification, and on the other, if we screw up really bad we’ll be saved by you. Those tradeoffs are not exactly tradeoffs for DB. Or even better:
At the end of 2010, Deutsche Bank was ranked the world’s most systemically important financial institution by Japan’s Financial Services Agency and central bank, based on estimates about the impact a failure would have on the global financial system, according to Mainichi newspaper.
“On the one hand, it made us proud, but on the other hand, of course, we’re aware of the responsibility,” [current lame duck CEO Josef] Ackermann said at an earnings press conference in February 2011 when asked about being deemed the world’s most systemically important bank.
I imagine that Japan’s Financial Services Agency was not ranking “most systemically important financial institution” with the intention of giving them a prize, but I do love that Ackermann took it that way. “Yay we were voted #1 most likely to blow up the Western financial system.” Read more »
Deutsche Bank Is Not Above Shuffling a Few Pieces of Paper To Keep Nosy Regulators From Demanding $20bn in New CapitalBy Matt Levine
Two things always worth talking about are bank regulation and path dependency so here’s this Journal story about Deutsche Bank that is like ooh-evil-Germans but also kind of meh:
Deutsche Bank AG changed the legal structure of its huge U.S. subsidiary to shield it from new regulations that would have required the German bank to pump new capital into the U.S. arm. … Taunus [the sub] — which at the end of last year had about $354 billion of assets and 8,652 employees, making it one of the largest U.S. banking companies — won’t have to comply with a provision of the U.S.’s Dodd-Frank regulatory-overhaul law that essentially forces the local arms of non-U.S. banks to meet the same capital requirements that American banks face.
Deutsche Bank has two main U.S. units. One is a trust company that has a banking license and must adhere to stringent U.S. bank-safety rules. The other is an investment-banking arm that isn’t technically a bank. Until recently, both units were housed under Taunus, which didn’t need to meet U.S. capital requirements, thanks to a waiver provided by the Fed a decade ago.
A provision of the Dodd-Frank Act, designed to prevent a repeat of the financial crisis, repealed the law under which that waiver and others were granted. That change was going to require Deutsche Bank to infuse Taunus, which for years operated with thin capital cushions, with what executives feared could be as much as $20 billion, according to people familiar with the matter.
Deutsche Bank responded last month by moving the trust company out of Taunus, named for a mountain range near Frankfurt. That means Taunus is no longer a bank-holding company and won’t have to comply with the new, tougher capital rules, even though Taunus still houses Deutsche Bank’s U.S. investment bank.
Instead it will be SEC regulated, like … well, every other US holding company that houses only an investment bank and not a bank bank. Bank. The bank bank subsidiary, on the other hand, will be owned directly by Deutsche Bank, which as the Journal previously explained gets to follow German but not US capital regulation. The bank sub will be a US trust company, so not quite true that it won’t have to meet the same capital requirements that American banks face. It will have to meet the same capital requirements that American banks face. Its just that its holding company will not be a US bank holding company, but will rather be a German thing regulated by Germans. Read more »
Today is bonus communication day at DB and while there are no specifics to be had just yet, apparently those hoping their decision to do the bare minimum last year would be handsomely rewarded were in for a disappointment. Read more »
“Deutsche bonus structure for Associates-Directors was revealed today:
*Up to eur50, all cash.
*Eur50-100, 70% deferred. Yes…
*Eur100+, 85% deferred.”
Carrick Mollenkamp is a great reporter who currently owns one of my favorite niches: finding insider moles to bring to light behavior at big financial companies that is ambiguously squicky. Today he’s got one that’s close to my heart, and here it is: a junior analyst at Deutsche Bank disagreed about a technical modeling question with his VP.
At a time when mortgage-backed securities were imploding and customers were fleeing the market, a junior analyst at Deutsche Bank AG protested when he was asked to alter the numbers in a spreadsheet to make a Deutsche security look less risky to ratings agencies, according to a person with knowledge of the matter.
The analyst, this person said, was asked by a mid-level Deutsche executive in late 2007 to make it appear that the investment would produce more cash than the bank actually expected at certain time points. …
[Ajit] Jain had studied at the Indian Institute of Technology in New Delhi and joined Deutsche in June 2006, according to employment records kept by the Financial Industry Regulatory Authority. He joined the New York office in September 2007, when the CDO Group was struggling to find investors.
Within a short time of his arrival, according to three people familiar with the matter, Jain raised questions about whether spreadsheets were being improperly altered. His complaints went to senior levels within Deutsche, including its legal and compliance departments, according to people familiar with the matter.
These spreadsheets were cash flow models for some of Deutsche’s CDO deals, which Deutsche gave to ratings agencies to rate those CDOs. They were complicated. How complicated? Here is a lovely detail: Read more »
Cuts are said to have gone down over the past two days. Read more »