Italian Investigations Deutsche Bank, an International Criminal Organization?

Italian prosecutors say Germany's largest lender has helped ailing Monte Paschi conceal losses, accusing it of running an international criminal organization at the time.
Judges in Italy will have to decide on the degree of criminality at Deutsche Bank. Picture source: DPA

Deutsche Bank's legal woes seemingly never come to an end. Prosecutors in Italy investigating the cover up of losses at Italian Monte dei Paschi, the world's oldest bank, allege that bankers at the German lender have been part of an international criminal organization. The charge constitutes aggravating circumstances to the already existing accusations over market manipulation the bank faces in the case.

Deutsche Bank and Nomura holdings, a Japanese financial firm, went on trial in December, accused of being in cahoots with ailing Monte Paschi to spruce up the Italian lender's balance sheet. Milan prosecutors originally charged 13 former managers of Deutsche Bank, Nomura and Monte Paschi for alleged false accounting and market manipulation.

But the new charges brought forward to the consideration of the three-judge panel would lead to higher penalties if confirmed. Prosecutors presented internal Deutsche Bank documents and emails, seen by news agency Bloomberg, to convince judges of the additional, aggravating circumstances.

The material included a London trader’s "well done!" message to a banker who is now on trial, Bloomberg reported.

A lawyer for the defendants tried to block the motion at Tuesday's hearing, arguing that there wasn't a connection between the original accusations and the alleged aggravating circumstances, the news agency said.


If proven, the aggravating circumstance may increase the eventual jail sentence for the market manipulation to a maximum of nine years. Giampiero Biancolella, attorney

“The trial for Deutsche Bank managers becomes more problematic after the judge’s decision,” Bloomberg quoted Giampiero Biancolella, an attorney specializing in financial crime who isn’t involved in the case. “If proven, the aggravating circumstance may increase the eventual jail sentence for the market manipulation to a maximum of nine years.”

The investigations revolve around the years 2008 to 2013, during which time prosecutors believe bankers of the three institutions colluded on an illegal derivatives trade. Monte Paschi had underestimated the €10 billion purchase of Banca Antonveneta, a subsidiary of Spanish Banco Santander, it bought in 2007 and faced financial woes.

Prosecutors say Deutsche Bank stepped up, agreeing to lend €1.5 billion to the Italian house after which the banks embarked on an illegal, highly complex derivatives trade to glam up Monte Paschi's balance sheet by more than €1 billion.

The deal blew up when Italian and German regulators started scrutinizing the transactions in 2013.

Among the bankers accused of facilitating the illegal trades is the former management of Monte Paschi, two ex-Nomura executives, as well as six Deutsche Bank employees who have left the company since. Among them are Michele Faissola, who at the time oversaw rates and commodities, and Ivor Dunbar, back then co-head of the bank's global capital markets business. Both bankers were deputies on former Deutsche Bank co-CEO Anshu Jain.

Germany's largest bank has been hit with a series of legal problems in recent years, many of which it was able to settle in the past months. In January, the lender agreed to pay $7.2 billion to settle an investigation by the US Justice Department into the sale of mortgage-backed securities.

Chief Executive John Cryan had hoped to close the book on expensive legal disputes and provisions for old liabilities now only total €3.2 billion, the bank said in its first-quarter earnings release. But it appears that prosecutors won't let the lender off the hook that easily.

Regina Krieger is Handelsblatt Italy correspondents, covering a wide variety of topics, including business, politics, culture, the Vatican, architecture and soccer. [email protected]