Deutsche Bank Now Has -- Count ’Em -- Five Outside Monitors

  • Ex-Justice Department lawyer to oversee homeowner relief
  • Others supervise swaps, currencies, interest rates, sanctions

Deutsche Bank Reaches Settlement With Justice Dept.

Banks that settle government investigations often receive an outside monitor to ensure that they make good on their promises to reform.

Deutsche Bank AG now has five.

To resolve the Justice Department’s investigation over its mortgage-backed securities business, the bank agreed Tuesday to a $7.2 billion penalty, more than half of which will provide relief to consumers hurt by its conduct. To check its remediation work, the bank agreed to hire an independent monitor, Michael Bresnick, a former prosecutor.

The monitoring job brings Bresnick full circle. He was a Justice Department lawyer who helped start the task force that investigated Deutsche Bank and many other U.S. and European banks. The probes led to multibillion-dollar settlements with the banks -- which created work for monitors like Bresnick, who’s now with the law firm Venable LLP.

Bresnick and a Deutsche Bank representative declined to comment on his appointment. Chief Executive Officer John Cryan apologized for the conduct when the settlement was announced earlier Friday, saying the bank had exited many of the underlying activities and has improved its standards.

Dubious Distinction

Bresnick joins four other monitors already in place at Deutsche Bank, making the German lender a leader in a dubious category. In recent years, many other banks took on one or two overseers as part of settlements over rate rigging, sanctions violations and other alleged misdeeds. Several foreign lenders ended up with them as part of deals with New York’s financial regulator, as well.

Other monitors at Deutsche Bank include Paul Atkins of Patomak Global Partners, a former Securities and Exchange Commission official who has advised the transition team of President-elect Donald Trump. A federal judge in New York appointed Atkins in October to oversee Deutsche Bank’s compliance with swap-reporting requirements contained in the Dodd-Frank bank legislation.

New York’s Department of Financial Services, which oversees financial institutions chartered in the state, has two monitors in place at Deutsche Bank, according to a person familiar with the matter. Devon Capital LLP, a financial advisory firm, is responsible for overseeing the bank’s sanctions compliance program, and Treliant Risk Advisors, a compliance and risk-management firm, is reviewing the bank’s foreign-exchange trading practices, the person said.

Deutsche Bank also agreed to hire Jonny Frank of StoneTurn Group, a forensic accounting firm, as part of a deferred prosecution agreement with the Justice Department in 2015 to resolve allegations that the bank participated in manipulating the London Interbank Offered Rate, the overnight interest rate known as Libor that’s used by global banks.

Atkins and representatives of StoneTurn and Devon declined to comment. A Treliant representative didn’t immediately respond to a request for comment.

Post-Crisis Inquiries

Bresnick, the new monitor, joined Venable from the Justice Department, where he served on the Obama administration’s Financial Fraud Enforcement Task Force, a consortium of prosecutors and other regulators established to identify and punish misconduct related to the 2008 financial crisis.

According to the law firm’s website, Bresnick helped start the Residential Mortgage-Backed Securities Working Group at the Justice Department. In that role, he “initiated innovative strategies to investigate fraud” in the residential mortgage-backed securities market using provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, “working directly with the U.S. attorney general and other senior Department of Justice leaders.”

There’s a chance that Deutsche Bank might end up with yet another monitor, depending on the results on a criminal investigation into so-called “mirror trades” conducted by the bank’s employees in Moscow. The mirror trades, which allegedly helped wealthy Russians convert rubles to western currencies, are being investigated by prosecutors at the Justice Department and at the office of the U.S. attorney in Manhattan.

In a memo to employees in December, the lender said it found “deficiencies” in the bank’s systems and controls in Russia. Deutsche Bank has said it’s cooperating in that inquiry.

— With assistance by Keri Geiger

    Before it's here, it's on the Bloomberg Terminal.
    LEARN MORE