Fresh corruption scandal engulfs Deutsche Bank

10.12.13 @ 09:29

  1. By Valentina Pop
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Berlin - US authorities are investigating Deutsche Bank, along with other multi-national banking behemoths like JPMorgan, Goldman Sachs and Citi, on suspicion of using corrupt practices in China in order to acquire contracts from state-owned companies, the New York Times reports.

  • Protest in Berlin against Deutsche Bank's offshore tax services (Photo: Uwe Hiksch)

They are said to be hiring the offspring of top Chinese officials.

According to JPMorgan's internal emails, seen by the US paper, the American bank even came up with an own name for the programme: "Sons and Daughters."

Deutsche Bank is suspected to have acted in a similar way, triggering the scrutiny of the US securities and exchange commission.

This is not the first time the German banking giant has cropped up when it comes to allegations of malpractice.

Last week, Deutsche Bank was fined by the EU commission - getting the single largest fine (€725 million) - along with seven other banks for forming an illegal cartel which was fixing the interbank exchange rates (Libor and Euribor).

Last year, it was convicted for fraud in Italy after it sold complex financial bets (derivatives) to local municipalities in Italy who then saw their money vanish as the investments went sour.

The lender's actions are not insignificant.

Deutsche Bank is the world's largest foreign exchange trader and has the single biggest exposure to derivatives (bets on other transactions) amounting to €55.6 trillion, twenty times the size of the German economy.

It played an important role in shaping the German government's response to the banking crisis of 2009.

However, relations with the finance ministry seem to have soured in the meantime.

Finance minister Wolfgang Schaeuble last week got in a row with Deutsche Bank chief Juergen Fitschen after calling for more regulation on banks.

Schaeuble had said in an interview with Handelsblatt that "banks still show great creativity in evading regulation." He later on explained in a press conference that the need for more rules for the banks is "self-evident" given these "highly innovative forces."

Fitschen hit back saying the German minister is using "populist means" and should keep "a sense of proportion."

“One can’t stand up and say the banks are still circumventing the rules," the banker said.

A spokesman for Chancellor Angela Merkel however sought to put the lid on the scandal during a press conference on Friday.

He said Schaeuble was right in "identifying the need for financial regulation" but that the German government will continue to take the banks' criticism "very seriously, because the banking sector plays a central role in our economy."

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