Deutsche Bank has increased its provisions for suspicious share trading in Russia, where it is investigating client activity that prompted the bank to partially pull back from the country, two people close to the matter said.
The bank had set aside roughly €700 million for litigation in Russia up to the third quarter of 2015 and has since increased provisions by a significant amount, one of the people familiar with matter said.
A charge of around €450 million that the bank booked last year is mainly related to the suspicious share trades, the sources said.
Regulators in Russia, Europe and the United States are investigating Deutsche Bank over so-called “mirror trades”, which may have allowed clients to move money from one country to another in 2014 without alerting authorities. Those trades could potentially have allowed clients to breach Western sanctions on Russia over the Ukraine conflict.
No other large banks have been fined yet for similar equities trading activity, so the cost of any potential litigation is hard to assess.
Deutsche Bank declined to comment.
In its annual report published in March the bank said: “Deutsche Bank is investigating the circumstances around equity trades entered into by certain clients with Deutsche Bank in Moscow and London that offset one another. The total volume of the transactions under review is significant.”
Sources familiar with the matter have previously said that Deutsche Bank had found a total of $10 billion of suspicious trades, including $6 billion in mirror trades.
Deutsche Bank has said that it was sharing its findings into the trades with European authorities such as the European Central Bank, Germany’s Bafin and Britain’s Financial Conduct Authority, as well as the US Justice Department and New York State’s Department of Financial Services.
Deutsche decided to cut back on its investment banking activities in Russia last year as part of a programme to shrink its global spread of businesses under the new Chief Executive John Cryan.
Cryan is trying to put the bulk of Deutsche Bank’s “sins of the past” behind it this year and Russia is one of the main remaining cases.
He said at an investor conference in May that it could be considered a success if the bank ended its 2016 financial year with a small loss but had got rid of a lot of the litigation.
A similar case involving a French bank and the US regulator over evading sanctions relating to Sudan, Iran and Cuba has led to warnings that Paris could the Transatlantic Trade and Investment Partnership (TTIP) into question if US threats turn into action.
US regulators could impose a record-breaking fine of $10 billion (€7.34 billion) against BNP Paribas. France will call the Transatlantic Trade and Investment Partnership (TTIP) into question if US threats turn into action. EurActiv France reports.