Leading global German lender Deutsche Bank, mistakenly gave a hedge fund client's account a surprising $6 billion infusion because of a mixup in a payment communication.
According to the Wall Street Journal, the junior foreign-exchange trader who was responsible for the error mistakenly paid out a gross amount instead of the net amount, which should have accounted for offsetting value. The trader was substituting for a colleague, a client salesperson who went on leave after providing instructions for the payment that had to be made to their US hedge fund client.
The bank was swift to take action and corrected the erroneous transaction. The fund was recovered the following day.
The quick response notwithstanding, this incident highlighted the deficiencies in operation and risk control that have been plaguing the bank. Deutsche bank is under a new leadership and is currently being restructured. Among the changes targeted in this move is to aim for firmer accountability in compliance among businesses as it splits its investment bank in half.
The bank has been through tough challenges in improving its technology systems and struggling to cope with stricter bank regulations and the dynamic demands of fast-paced markets. It has made a commitment to eliminate technological and human error by increasing its technology allocation and by effecting more efficient surveillance.
Also reported on Yahoo News, the incident came in the wake of an unfortunate series of mishaps by the bank so that a major overhaul of business and management was launched.
To date the bank is facing almost 6,000 legal cases. In May this year, the bank received a $2.5 billion fine for its participation in interest rates rigging.
Deutsche Bank's co-chief executives Anshu Jain and Juergen Fitschen had to resign in June. They were replaced by the bank's new co-CEO John Cryan.
