Deutsche Bank Fined, FDIC Vote, JPMorgan Anti-Hack: Compliance

Deutsche Bank AG, Europe’s biggest investment bank, was fined 4.7 million pounds ($7.8 million) by the British markets regulator for failing to properly report millions of transactions.

A coding error reversed a buy/sell indicator, leading Deutsche Bank to improperly report on $29.4 million in transactions involving a type of swap in which the seller agrees to pay the buyer the difference between the current value of a stock, and its value when the contract is made. If the difference is negative, the buyer pays the seller. The swaps were made between November 2007 and April 2013, the Financial Conduct Authority said in a statement yesterday.

The FCA has been cracking down to ensure firms provide accurate and full reporting on transactions. The London-based regulator has fined 10 other firms for similar failures, according to its statement.

Deutsche Bank said it “immediately undertook a complete review of our transaction reporting systems to rectify the problem and strengthen our control framework” after the issue was identified in March 2013, according to an e-mail yesterday from Kathryn Hanes, a London-based Deutsche Bank spokeswoman.

The Frankfurt-based bank is spending 1 billion euros ($1.3 billion) to improve its controls and reporting systems and is dedicating 1,300 people to that effort, including the hiring of about 500 people in the U.S. this year, Chief Financial Officer Stefan Krause said last month.

Compliance Policy

FDIC to Hold Sept. 3 Board Meeting For Vote on Margin Rule

The Board of Directors of the Federal Deposit Insurance Corp. will consider proposed rules at an open session Sept. 3, according to a public notice published on the agency’s website, as required under a federal law known as the Government in the Sunshine Act.

No discussion of the rules is planned for the session, according to the notice. The matters “will be resolved with a single vote, unless a member of the board of directors requests that an item be removed from the agenda,” according to the notice.

The rules to be voted on concern margin and capital requirements for covered swap entities; a liquidity coverage ratio final rule; and regulatory capital rules, according to notice.

Separately U.S. banks had $40.2 billion in net income in the second quarter as lenders cut costs to offset a decline in trading income, the FDIC said in its quarterly snapshot of the industry’s performance.

After a record-setting average of $38.6 billion in industry-wide profit per quarter last year, banks have had mixed results this year, the FDIC said in the Quarterly Banking Profile released in Washington yesterday.

Compliance Action

York London Office Said to Be Probed by Spain Over Bankia Trade

The London office of James Dinan’s York Capital Management LP may face civil charges from Spanish regulators for allegedly using a banned trading technique before last year’s bailout of mortgage giant Bankia SA.

The Comision Nacional del Mercado de Valores, or CNMV, notified Dinan’s firm in March it was scrutinizing a May 2013 short sale by the York European Focus Fund, according to a regulatory filing. The stock involved was Bankia, according to a person familiar with the matter, who asked not to be identified because the details are private. In December, the Spanish regulator started a probe into bets made against Bankia shares before May 23, 2013, when the stock plunged 51 percent after terms of a government bailout were disclosed.

The civil charges against York would be one of the first cases filed under a new regulatory code adopted by the European Union in 2012 to restrict short selling, blamed by many local officials for exacerbating the global financial crisis. Richard Swanson, York’s general counsel, declined to comment. In a regulatory filing, York said the trade was reviewed by its compliance department and other parties, and that there were circumstances outside its control that prevented a timely delivery of shares to execute the trade.

The CNMV as a policy does not comment on its supervision process, according to a spokeswoman for the regulator.

JPMorgan Boosts Customer Data Protections After Cyber-Attack

JPMorgan Chase & Co., the biggest U.S. bank, said it increased defenses against computer hackers after an attack against the industry this month.

The lender is working with U.S. authorities to determine the scope of the assault and is taking additional steps to safeguard confidential information, Patricia Wexler, a spokeswoman for the New York-based bank, said yesterday in an e-mail, declining to give specific examples. JPMorgan will contact any customers that might have been affected, Wexler said, adding that the firm hasn’t seen unusual fraud levels.

JPMorgan was among at least five banks targeted in the coordinated attack on financial institutions in recent weeks, a U.S. official said Aug. 27. The assault led to the theft of customer data that could be used to drain accounts, according to another person briefed by U.S. law enforcement. Both asked not to be identified because U.S. probes are continuing.

Chief Executive Officer Jamie Dimon, 58, has warned shareholders in annual letters that hackers’ efforts to breach the bank’s computers were growing more frequent, sophisticated and dangerous. The New York-based bank expected to boost yearly spending on cybersecurity to about $250 million by the end of 2014, with 1,000 workers dedicated to the effort, he wrote in April.

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