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Categorized | Banks, Financial

Deutsche rejects claim Jain lobbied for traders’ €130m bonus

Posted on June 30, 2015

Anshu Jain, outgoing co-CEO of Deutsche Bank©AFP

Anshu Jain, outgoing co-CEO of Deutsche Bank

Deutsche Bank’s outgoing co-head, Anshu Jain, was embroiled in a furious row on Tuesday with German financial regulators over a bonus worth millions of euros that was paid to a former star trader.

BaFin, the watchdog, accused Mr Jain, who has just stepped down as Deutsche’s co-chief executive, of personally lobbying for the bonus for Christian Bittar, who is now part of a criminal investigation into alleged benchmark-rigging.

    A BaFin report said senior management at Deutsche had a “remarkable” relationship with Mr Bittar. It said Mr Jain pressed for a joint bonus as high as €130m for him and another trader, telling the bank’s chairman at the time that they were “good guys, the best on the Street”.

    Deutsche denied the allegations on Tuesday night, saying that Mr Jain’s comments were taken out of context. It said that Mr Bittar was contractually entitled to an even higher bonus and had in fact deferred half of it.

    BaFin’s disclosure is made in a report written by the watchdog in the wake of the Libor scandal. Deutsche is one of a number of banks that have paid more than $9bn in fines to settle claims that they rigged Libor, a benchmark that underpins around $350tn of debt worldwide. Deutsche paid a record $2.5bn in penalties over Libor in April.

    Mr Jain ordered an internal probe to see whether the high profits generated by Mr Bittar and the money-markets desk were genuine, but it was superficial, BaFin found. The reason it was ordered was that “so much money had never been earned before”, the BaFin report said, quoting a Deutsche manager.

    Mr Bittar, who left the bank in 2011 and is based in Singapore, is under investigation by the UK’s Serious Fraud Office as part of its criminal probe into the rigging of Euribor, the Brussels equivalent of Libor. No charges have been filed against Mr Bittar, who denies all wrongdoing.

    The bank rejected the allegations that Mr Bittar and Mr Jain had a close relationship, and that the internal review was insufficient. People familiar with the situation said Mr Bittar moved to Singapore for family reasons.

    The bank also denied that Mr Jain had lobbied for a higher bonus for Mr Bittar. “No one needed to lobby for those involved to be paid a bonus because they had contracts which entitled them to a percentage of the profits they generated,” it said. “Rather, the traders involved agreed to defer half of their entitlement given the circumstances of the financial crisis.”

    Deutsche said these types of contracts were not uncommon in the market at the time but it no longer has them. Mr Bittar’s lawyer declined to ­comment.

    The allegation of a close relationship between him and his superiors is another blow to Deutsche’s senior management, which in recent months has been hit by the Libor fine, a stinging protest vote from investors at its annual strategy meeting, and the departure of Mr Jain and his co-head, Jürgen Fitschen — who is currently on trial in Germany with four other bank officials on fraud charges.

    “The culture of the bank, dating back to pre-crisis era, needs to be changed,” said a top 20 shareholder in Deutsche. “It needs to rebuild relations with regulators.”

    Felix Hufeld, president of BaFin, said on Tuesday: “It is not enough to have a good strategy. It’s a mass of measures that some banks master better than others. Deutsche Bank has some catching up to do.”

    Mr Jain and Mr Fitschen step down on Tuesday, leaving behind a litany of legacy conduct issues for their successor, John Cryan, to deal with.

    The German prosecutor confirmed this week that it had launched a criminal investigation off the back of BaFin’s findings, detailed by the Financial Times last week, that Deutsche’s senior management had allegedly acted negligently over the rate-rigging scandal.

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    BaFin’s report included an allegation — strongly denied by Mr Jain — that he may have knowingly misled the German central bank.

    Deutsche has until next week to respond formally to BaFin, which will then consider whether supervisory measures should be imposed.

    The regulator said: “Attention is drawn to the coincidence in terms of time between sending Christian Bittar to Singapore at the beginning of 2010 and the first inquiries from regulators on 13th January 2010 and 5th February 2010,” detailed the BaFin report, which has not been made publicly available but which has been seen by the FT.

    Deutsche has already said that it disputes key parts of the BaFin report.

    Mr Bittar was one of three traders embroiled in either the Libor or foreign exchange rigging scandals who won the right on Friday through a court decision to challenge the UK regulator’s findings against banks because the watchdog may have improperly identified the traders in the process.

    If the Financial Conduct Authority identifies individuals in its published notices, it is meant to give them a chance to make their case before publication and, crucially, give them access to documents and evidence it relies on.