Spanish Watchdog market supervisor, CNMV, announced on Thursday that it has commenced disciplinary proceedings against Deutsche Bank (DBKGn.DE) over two alleged “very serious infringements.” These investigations relate to advice provided to Spanish clients concerning financial instruments based on currencies.
1. Nature of Allegations
The CNMV has identified two “very serious infringements.” The first involves a breach of transparency obligations and the duty of disclosure to clients. The second centers on a violation of the duty to act in the best interest of clients concerning structured over-the-counter (OTC) currency derivatives.
2. Deutsche Bank’s Response
Deutsche Bank acknowledged the proceedings in a statement, confirming its awareness of the historic sale of foreign exchange derivatives in Spain prior to April 2021. While the bank refrained from commenting on specific details, it emphasized its commitment to reviewing and enhancing relevant processes and controls.
3. Previous Penalties and Internal Investigations
This isn’t the first time Deutsche Bank faces scrutiny in Spain. In March 2022, the CNMV fined the bank 3 million euros ($3.32 million) for applying significantly higher spreads on clients’ repurchase of structured bonds. The current disciplinary proceedings stem from facts identified through internal investigations carried out by Deutsche Bank itself.
4. Potential Fines and Regulatory Framework
The CNMV did not provide specifics on the potential fines Deutsche Bank could face in relation to the ongoing proceedings. However, under Spanish Watchdog markets legislation, very serious infringements could result in substantial penalties. These penalties might include fines of up to 5 million euros or 5 times the gross profit made or loss avoided due to the infringement. Alternatively, fines could be set at 5% of the infringing entity’s own resources or 5% of the total funds, whether its own or those of third parties. In extreme cases, fines might climb to 10% of the total annual turnover of the offending entity.
5. Uncertain Outcome and Regulatory Implications
It’s important to note that the initiation of disciplinary proceedings does not prejudge the final outcome. The investigations will likely shed light on the extent of Deutsche Bank’s adherence to regulatory obligations. The outcome could have broader implications for how financial institutions navigate and comply with regulatory frameworks
particularly concerning client advice and financial instruments.
As Deutsche Bank navigates this investigation, the financial industry will keenly observe the proceedings
considering potential shifts in regulatory scrutiny and client protection standards.