Tags: accounting, Credit Derivatives, Derivatives, Deutsche Bank, Eric Ben-Artzi, leveraged super senior tranches
Oh man, what is going on in this FT article? Here is the bottom line:
In a series of complaints to US regulators, two risk managers and one trader have told officials that Deutsche had in effect hidden billions of dollars of losses.
“By doing so, the bank was able to maintain its carefully crafted image that it was weathering the crisis better than its competitors, many of which required government bailouts and experienced significant deterioration in their stock prices,” says Jordan Thomas, a former US Securities and Exchange Commission enforcement lawyer, who represents Eric Ben-Artzi, one of the complainants.
The “in effect” does a lot of work there; Deutsche Bank “in effect” hid billions of dollars of losses because there were no losses. Other than that!
Here’s a synopsis of what seems to have been going on:
- Starting in 2005, Deutsche did some credit trades where they bought protection from some Canadian pension funds and sold protection to hedge funds, etc.
- The bought and sold protection were not identical, with various technical bits of non-overlap that you can read about at your leisure down below.1
- A credit crisis occurred, changing the risks involved in those non-overlapping bits from silly, abstract, purely theoretical risks into significantly more alarming and more-likely-to-occur but still purely theoretical risks.2
- Deutsche’s people sort of ran around dopily trying to figure out what to do about it. Here’s a condensed version of the running around they did about the main risk, the “gap option” that DB was short in its leveraged super senior trades:
Read more »
Tags: alleged rogue traders, ambassadors, Deutsche Bank, Kweku Adoboli, performance reviews, Ron Greenidge, UBS, work/life balance
Adoboli lawyer Charles Sherrard said the bank became “more aggressive in terms of its desire to make profits” in 2011, while cross-examining one of Adoboli’s former bosses at a fraud trial in London today. “The culture, practice at the bank you were working for, didn’t matter as long as you were making money,” Sherrard said to Ron Greenidge, who oversaw UBS’s exchange-traded-funds desk until April of last year…Greenidge, who worked at UBS for 19 years, said today he was dismissed for gross misconduct because of Adoboli’s trades. He said he felt the bank was making him a scapegoat…Sherrard read out Adoboli’s performance reviews from 2009 written by Greenidge, which said the trader needed a better balance between work and other activities. Greenidge said Adoboli was a “great ambassador for the ETF product” and had outstanding performance that year…The culture at UBS changed with the arrival from Deutsche Bank of Yassine Bouhara in 2010 as the co-head of equities, Sherrard said. Bouhara is no longer at the bank. “The very nature of the bank became more aggressive in terms of its desire to make profit,” Sherrard said to Greenidge. “The mantra was coming from above was revenue, revenue, revenue.” [Bloomberg]
Tags: Deutsche Bank, Layoffs, that's gonna leave a mark
In addition to cuts in the Industrials; M&A; Real Estate, Gaming, Leisure & Lodging; and Leveraged Finance, the bank’s converts desk was said to be “gutted,” losing at least five Managing Directors and a few analysts. On the bright side, today was expected to be the last day of layoffs for the foreseeable future.
Tags: Deutsche Bank, Layoffs, that's unfortunate
Cuts are said to have gone down in DB IBD. Read more »
Tags: Asia, Deutsche Bank, Layoffs
The Germans are not yet done firing employees in Asia. Read more »