Tags: compliance | transparency | banks | financial

'Lost' Financial System Needs Some Straight and Narrow Discipline

By    |   Friday, 25 July 2014 06:55 AM

Deutsche Bank seems to represent a microcosm of our global financial woes.

In a letter to bank executives, the Federal Reserve Bank of New York has found serious issues related to Deutsche’s U.S. operations, including inaccurate and unreliable financial reporting, inadequate auditing and oversight, and insufficient technological support, all requiring broad remedial activity. The New York Federal Reserve Bank supervises large U.S. and foreign banks, in part through embedded regulators at these institutions.

Deutsche bank has been under fire from several vantage points in recent years.

Last year, the Federal Deposit Insurance Corporation declared the bank was severely undercapitalized. This year, Deutsche removed itself from the gold and silver fixes, systems apparently replete with inherent conflicts of interest that involved price collusion. Both metal pricing systems are being revamped to increase transparent and fair competition.

This week, a U.S. Senate committee accused the bank of enabling hedge fund clients to avoid billions of dollars in taxes over the past decade by reclassifying short-term profits as long-term profits, which are taxed at half the rate.

In 2010, the bank launched Stride, the Strategic Reporting and Information Delivering System, which was designed to consolidate more than 1,000 information technology systems into one — an attempt to enhance the reliability of its financial reporting.

Despite this effort, the Federal Reserve Bank of New York has concluded Deutsche Bank’s operations management systems remain unsatisfactory, and the goals of Stride have not adequately addressed the issues of concern, including oversight, auditing, reporting, and technology.

Echoing this financial dysfunction is a recent two year prison sentence and $1.75 million fine received by Jesse Litvak, a former Jeffries Group LLC senior trader on 15 counts, including 10 related to securities fraud. In essence, he misled clients regarding the prices he paid for bonds tied to the $700 billion Troubled Asset Relief Program, which was designed to bail out the banks during the 2008 financial crisis.

This case is another microcosm of the dysfunctional financial system. One of his lawyers believes his client has demonstrated typical Wall Street behavior and seems to be treated in a selective and disparate manner.

Greater compliance and transparency
seem to be the best weapons of choice to reign our misguided financial system.

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Greater compliance and transparency seem to be the best weapons of choice to reign our misguided financial system.
compliance, transparency, banks, financial
Friday, 25 July 2014 06:55 AM
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