2023-08-11 14:25:03
Frankfurt After a EUR 61 million booking error, the pressure on the German Securities Service Bank (DWP) is increasing. It is jointly owned by the German savings banks and cooperative banks.
The financial supervisory authority Bafin identified serious deficiencies at the institute during a special audit. The bank confirms the relevant Handelsblatt research.
The deficiencies identified by the Bafin are not so serious that the financial supervisory authority is therefore demanding the dismissal of DWP board members, said several people familiar with the topic. Nevertheless, the pressure on the DWP board is increasing.
Some shareholders felt personnel changes were necessary, even regardless of the booking range, several insiders said. A replacement of CEO Heiko Beck is likely. Consultations are already underway as to who could succeed him.
A spokesman for the bank, on the other hand, said that no personnel changes were planned on the DWP board. The booking gap was not only examined by the Bafin, but also by the internal audit and the consulting company Deloitte, which had been commissioned by the board of directors and the supervisory board.
“All reports come to the conclusion that the faulty stock exchange transaction came about as a result of an atypical constellation of several unfavorable external factors,” explained the DWP spokesman.
CEO Beck therefore sees no need for personnel consequences. “There is no reason for personnel law or criminal law measures at DWP Bank, as the main reasons were at the process and control level,” he told the Bloomberg news agency.
Bafin criticizes processes and control systems
The DWP handles securities transactions for numerous financial institutions and takes care of the safekeeping of the papers. It is therefore of great importance for the entire German banking sector.
After the booking margin at the end of 2022, Bafin carried out a special audit in the area of capital measures at DWP, the bank explained. In the test report that was subsequently written, the Bafin also identified “individual deficiencies that it classified as important” at the DWP. There were no serious defects.
When banks are reviewed by the financial regulator, the rating scale ranges from “no deficiencies” (“F0”) to “severe deficiencies” (“F4”). The major deficiencies (“F3”) identified in the DWP are the second worst assessment.
“The auditors identified areas at DWP Bank in which individual processes did not run according to plan and should be made even safer through additional control mechanisms, including control mechanisms when carrying out capital measures,” the institute explained.
“Immediately after the incident in December 2022, DWP Bank implemented further risk-reducing measures in the area of capital measures in order to rule out extremely rare incidents like this as best as possible.”
According to financial circles, the Bafin also wants to publish the deficiencies and the instructions to eliminate them on its website. However, it will be some time before this happens. The Bafin did not want to comment on the subject.
Mistakes in a commodity bet cost millions
The late-December trading spread involved a lesserly traded debt security (ETC) that an investor used to bet on the performance of commodities with a high degree of leverage.
According to DWP, the customer had purchased this ETC in December for a four-digit sum. This was followed by a so-called reverse split, in which a large number of pieces of a security are combined into a single piece.
As a result of this reverse split, the value of the ETC in the depot changed massively, but the number of shares was not adjusted. As a result, DWP had to buy hundreds of thousands of shares of the rare security at a high price within a very short time in order to be able to correctly execute the customer’s subsequent sell order.
The whole thing cost the DWP 61.1 million euros. The pre-tax profit therefore collapsed last year by 97 percent to 1.9 million euros.
The incident was also possible because changing securities identification numbers in reverse splits for international securities was not mandatory at the time, explained the DWP. The bank has therefore “successfully campaigned for a mandatory change via international bodies, so that a repetition for other market participants is largely ruled out”.
Deka wants to take over DWP shares from savings banks
According to its own statements, the DWP provides a good two-thirds of the banks based in Germany with investment services. Half of it is owned by the cooperative and half by the public finance association.
While all shares of the cooperatives are bundled at DZ Bank, they are distributed among five institutes under public law. The largest shareholders are the Rhenish and Westphalian Savings Bank Associations, each with 20 percent. The state banks BayernLB and Helaba each hold 3.75 percent, the fund provider Deka holds 2.5 percent.
According to financial circles, there are talks among the public institutions about bundling all the shares in Deka. In this way, the sector can better represent its interests. The project has been running for a long time and has nothing to do with the booking gap. Whether an agreement can be reached depends above all on whether all parties involved can agree on a price.
For Deka, an increase would make strategic sense, argue public bankers. After all, the securities house of the savings banks wants to outsource more business to DWP. Deka did not want to comment on the subject.
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