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BLOOMBERG
Deutsche Bank AG’s sales of foreign-exchange derivatives to small companies in Spain are being examined by securities regulator CNMV, adding to scrutiny of the lender over the matter.
The focus of the assessment is whether the sales complied with rules that effectively ban marketing complex derivatives to inexperienced buyers, a spokesman for the regulator said. He declined to provide further details on the analysis being undertaken.
“As we have previously stated, we have been reviewing parts of our sales activities in structured FX derivatives and taken appropriate action including improving our processes and enhancing our controls,” said a spokesman for the lender. “This is an ongoing process.”
Deutsche Bank’s derivatives sales in the country have already attracted scrutiny by the European Central Bank, which is concerned that the German firm hasn’t been explaining the associated risks sufficiently, Bloomberg reported previously. Some of the lender’s clients suffered steep losses from the products and argue that they were too complex for them to fully understand.
Deutsche Bank has since stopped selling the derivatives in Spain and it’s trying to wind down the existing portfolio, though that’s taking longer than previously thought, Bloomberg has reported. The decision came just before CNMV recently introduced new restrictions on the sale of complex products to retail clients, which can include small companies, a person familiar with the matter has said.
The watchdog in July published a resolution restricting marketing a type of derivatives known as financial contracts for differences to retail clients. The products are particularly risky as a small market movement can sometimes wipe out an investor’s entire deposit.
Deutsche Bank previously conducted a long investigation, known as Project Teal, into alleged mis-selling of other FX swaps in Spain by its investment banking division. Deutsche Bank settled some of those cases and is facing off over others in court.