Deutsche Bank’s transaction banking segment plans to spend the rest of the year increasing the stability and security of its systems, which have been berated by regulators for giving incompetent controls against financial crime.
An investigation by the United Kingdom’s Financial Conduct Authority of anti-money-laundering controls at both Deutsche Bank’s investment bank and transaction banking unit determined several lapses, varying from insufficient transaction monitoring to uncompleted works in reviewing clients.
One of the bank’s longest-serving senior banker, Werner Steinmüller, has told reporters that he intends to deal with “everything in regard to anti-money-laundering, filtering, and sanctions” this year.
“Our number one priority is to make sure everything here is in order,” he stated in a recent interview. “We want to ensure the safety, stability and soundness of our systems in 2016, and then we will start on the next growth phase.”
One of the things that the FCA criticized about Deutsche was that the Mantas system that it applies for monitoring payments in its transaction unit was out of date. Steinmüller stated that the Deutsche Bank was presenting the most up to date version and that he expected the process to be finalized within the next twelve months in the bank’s major location in Germany, the United Kingdom and the United States.
The segment has also been conducting an in-depth review of its risk management client, discarding some who no longer meet its standards.
Meanwhile, the transaction banking unit has been one of the best performing arm of the Deutsche Bank in recent years despite the FCA findings. The unit’s performance has increased its revenues to 4.6 billion euros and its pre-tax profits to 1.4 billion euros over the past decade.
The bank’s new chief executive John Cryan, has determined the unit as one field in which the Deutsche can grow. Under the bank’s new five year plan, which will join the transaction bank with Deutsche’s investment banking segment, it has been provided 1 billion euros to invest.
Steinmüller explained that along with tightening controls, the majority of his funds would be spent on improving the stability of the division’s systems, which on peak days manage as much as 4 trillion euros in transactions. “We will also invest into digital products and services. This will be key for future growth,” he said.
However, he admitted that he did not expect much development in the division this year, but suggested that the transaction bank should be able to increase between 3 and 5 percent a year on average over the next four years. That indicates a slower growth compared to the 8 percent that the unit has averaged over the past decade.
“We want to grow in Asia, that’s completely clear,” he said, noting India and China as markets of specific interest.
Deutsche Bank Shares Declines
Shares of the Deutsche Bank dropped by as much as 5 percent on Friday as market players became aware of the increasing possibility that the US regulatory actions could wipe out the already poor results of turnaround moves at the bank.
The bank is facing various dispute charges, including one related to the sale of retail-mortgage-backed-securities in the United States during the financial crisis.
The decline comes one day after analysts downgraded the Deutsche stock from overweight, to equal weight, noting the possible impacts of further regulatory actions as a main factor behind their decision. They provided an estimate on Thursday, that the mortgage bond issue could cost the bank up to $4.5 billion.