Deutsche Bank Regulator Questions Jain in Bonus Award

Germany’s financial regulator is looking into whether former Deutsche Bank co-chief executive Anshu Jain pushed for a $140 million bonus for Christian Bittar, who is reportedly being investigated for involvement in an interest-rate manipulation scandal.
Anshu Jain was criticized by German financial watchdog Bafin for allegedly having pushed Mr. Bittar's bonus pay.

Two days after Anshu Jain stepped down as Deutsche Bank’s co-chief executive, new accusations from Germany’s financial regulator BaFin emerged, raising questions about why the investment banker left Germany’s biggest bank.

The regulator is investigating Mr. Jain's role in allegedly lobbying for a 90 million pound, or $140 million, bonus for Christian Bittar, a London-based investment banker at Deutsche Bank in 2008 and 2009, people familiar with the matter told Handelsblatt, citing a letter Bafin had sent to Deutsche Bank.

The Frankfurt-based bank has until Monday to respond to the regulator’s concerns. The London Financial Times reported that Mr. Bittar, who left Deutsche Bank in 2011 and now lives in Singapore, is under investigation by the U.K. Serious Fraud Office in the rate manipulation scandal.

Mr. Bittar, the Financial Times reported, denies any involvement in the rate scandal.

A spokesperson at Deutsche Bank rejected suggestions that Mr. Jain had improperly lobbied for Mr. Bittar's compensation, saying bonuses are awarded under a formula that compensates bankers with a percentage of business.

Mr. Jain defended Mr. Bittar and other traders in front of Deutsche Bank’s chairman during the financial crisis, saying these were “good guys”, according to the letter from the regulator.

“No one had to advocate in favor of the bonuses of those involved. According to their contracts they were entitled to a percentage of the profits generated by them,” the Deutsche Bank spokesperson told Handelsblatt.

The German regulator BaFin declined to comment.

Mr. Jain defended Mr. Bittar and other traders personally to Deutsche Bank’s supervisory board chairman during the global financial crisis, saying they were “good guys,” according to the letter written by a regulator.

The Deutsche Bank spokesman said Mr. Jain’s comment at the time on Mr. Bittar and other traders was taken out of context.

Earlier this year, a document from U.S. authorities raised questions about Mr. Bittar, a former star trader who no longer works at Deutsche Bank, of playing a key role in the rigging of interest rates benchmarks in London.

Deutsche Bank in April was hit with a record $2.5 billion fine by U.S. and U.K. authorities for participating in colluding with other major global banks in attempting to fix and profit from interest rates.

Traders at U.S., U.K., German and other European banks were found to have colluded to influence the interest rate benchmark, which regulates how much certain banks charge each other for short-term loans across the world.

 

The Libor Scandal-Deutsche Bank

 

Deutsche Bank’s fine in April was the biggest handed out in the interest manipulation scandal, partly because the bank misled the regulator, Britain’s Financial Conduct Authority said at the time.

The German bank overhauled its board last month, replacing Mr. Jain with British banker John Cryan, after Deutsche Bank failed to sustainably increase profits and had to pay billions of euros in legal costs and fines to settle scandals, mostly originating from investment banking operations.

The financial regulator's latest inquiry raises new questions about the credibility of the bank’s explanation for the reasons behind Mr. Jain’s departure.

Deutsche Bank has steadfastly insisted that Mr. Jain’s departure was not due to pressure from the German financial supervisor.

Mr. Jain made his career at Deutsche Bank’s investment banking operations, running its global markets team from 2001 to 2010, and the entire investment banking business from July 2010.

He became co-chief executive in May 2012 along with Jürgen Fitschen, who will step down next year after the spring annual shareholders' meeting.

In the same letter sent to the bank, BaFin also questioned whether Mr. Jain knew earlier about manipulation of Libor benchmark interest rates by his traders than than he had previously told the Bundesbank, Germany’s central bank.

Mr. Jain had told the German central bank that he hadn't hear of rumors of manipulation in his department until 2011. He has denied having knowledge of the improprieties and the bank earlier this week said that the regulator's letter found no evidence of involvement or knowledge by any senior managers at the bank.

 

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The financial supervisor is now investigating whether Mr. Jain knew that traders at Deutsche Bank were manipulating the benchmark earlier than he admits. Mr. Jain has told the Bundesbank that he first found out about the possible manipulation in 2011. BaFin alleges he already received an email in 2008 containing rumors that the rate manipulation was underway.

A Frankfurt prosecutor is looking into whether more managers at Germany's largest bank than previously thought participated in an illegal conspiracy to fix global interest rates, a prosecutor spokesperson told Handelsblatt on Monday.

The reason for the investigation was a report from Germany’s financial regulator BaFin, which names 20 bankers from Deutsche Bank, according to information in financial circles, including Mr. Jain. But according to Handelsblatt’s information, Mr. Jain is not part of the investigator’s preliminary review.

Deutsche Bank said on Monday the report by BaFin had confirmed that it had not found evidence that current or previous senior executives had known that its bankers were involved in rate-fixing before an internal investigation revealed this in 2011. The bank said it was preparing a formal response to the Bafin report.

Mr. Jain, a British native who has worked in New York City for Merrill Lynch in the 1990s, is in talks with Japanese tech lender Softbank for an executive position, the New York Post reported on Tuesday, citing a person familiar with the matter. Softbank declined to comment.

 

Katharina Slodczyk is Handelsblatt's London correspondent. Michael Maisch is the deputy chief of Handelsblatt's finance desk in Frankfurt am Main. Martin Kölling is East-Asian correspondent at Handelsblatt since 2012. Gilbert Kreijger is an editor with Handelsblatt Global Edition in Berlin. To contact the authors: [email protected], [email protected][email protected] and [email protected]