Ex-SEC Official Picked to Monitor Deutsche Bank's Derivatives Overhaul
October 20 2016 - 5:40PM
Dow Jones News
A former Securities and Exchange Commission official has been
appointed to monitor an overhaul of Deutsche Bank AG's systems for
reporting trades in its giant derivatives book.
Paul Atkins was named to the role by a federal judge on
Thursday, following a request by the Commodity Futures Trading
Commission. Last year, that agency fined Deutsche Bank $2.5 million
for failing to make timely and accurate reports of derivatives
trades known as swaps.
In August the CFTC said the bank's systems were still having
problems making those reports, and sought court appointment of a
monitor. Mr. Atkins was an SEC commissioner from 2002 to 2008, and
is now chief executive of regulatory consulting firm Patomak Global
Partners LLC.
A spokesman for Deutsche Bank declined to comment. The bank has
previously said that it and the CFTC "have agreed on steps to
resolve this matter [and] continue to work on enhancing our
reporting systems." Mr. Atkins couldn't be reached for comment.
"Inaccurate and untimely reporting of swaps data undermines the
integrity of the markets," U.S. District Judge William Pauley III
wrote in his opinion. "The consequences are significant."
He further noted this was "particularly true" for Deutsche Bank,
saying the bank "reportedly commands one of the largest derivatives
portfolios in the world." The bank said its exposure was a
notional, or face value, $47 trillion as of last year.
The unusual appointment of an outside monitor is the most vivid
example of the scale of technology challenges at big banks, which
face increasing technology costs at a time when revenues are being
squeezed by higher capital requirements and low interest rates.
Banks say swaps trades aren't simple to track, requiring
coordination of dozens of previously incompatible systems that
weren't designed for real-time reporting. The swaps-reporting rules
are meant to avoid the opacity that plagued derivatives markets in
the financial crisis and kept regulators in the dark about the
extent of bank exposures.
Judge Pauley had declined to accept Deutsche Bank and the CFTC's
recommended monitor, the consulting firm Chatham Financial. Mr.
Atkins must within three months give the court a timeline for the
necessary fixes to the bank's systems and procedures.
The CFTC this year has also fined J.P. Morgan Chase & Co.,
Wells Fargo & Co., and Barclays PLC for violations related to
reporting swaps trades. Those problems were resolved, the CFTC said
at the times of the fines.
Write to Telis Demos at telis.demos@wsj.com
(END) Dow Jones Newswires
October 20, 2016 17:25 ET (21:25 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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