Deutsche Bank’s risk controls may be in need of further tinkering following a poorly timed trade that could leave the bank losing upwards of $60 million.
The beleaguered lender finds itself in a troubled situation after a derivatives trade linked to US inflation threatens to spiral out of control and rack up nearly $60 million in losses.
Of more immediate concern is the facilitation of such a trade without any of the requisite risk control measures.
Indeed, this is not the first time Deutsche Bank has breached risk limits on its trades.
The potential loss of $60 million in a single trade is a major blow to Deutsche Bank’s business.
Deutsche Bank’s trading business earned $270 million in Q1 2017 – the prospect of such a catastrophic trade erasing 22 percent of an entire quarter’s profits would constitute a tremendous vulnerability for the bank’s risk controls.
Unfortunately for Deutsche Bank, this latest instance of lapses in its risk controls comes at a poor time for the group as it looks to turn the page on a past rife with fines, trading misconduct, and lax controls. That the trade focused on derivatives is also a sensitive area for Deutsche Bank, amidst recent concerns voiced by the European Central Bank as to how the group manages and values this segment.
Source: Finance Magnates
Junior Trader Stefan Panteleev
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