Deutsche Bank AG is expected to be fined by the Federal Reserve and the New York State Department of Financial Services for its conduct in the foreign exchange market, a person familiar with the matter said.
The German lender said Monday that the U.S. Justice Department had closed a criminal inquiry into its currency-trading activities without action.
But regulators are in the final stages of their own reviews of that conduct to determine what fines, if any, the bank should pay, the person said. The Federal Reserve has finished its investigation, the person said, and the New York bank regulator is close to wrapping up its own probe.
Deutsche Bank has moved beyond most of its legal challenges in the U.S. In the past two years, it has struck settlements with the Justice Department over allegations of interest-rate manipulation and its sale of toxic mortgage securities. Separately, it reached settlements with the DFS over sanctions violations and “mirror trading” that moved billions of dollars out of Russia. The bank also paid a $2.5 million civil penalty to the Commodity Futures Trading Commission for failing to report its swaps transactions.
While the bank no longer has to contend with the Justice Department’s foreign exchange probe, the U.S. attorney’s office in Manhattan is continuing its investigation of sanctions violations and the Russian mirror trading. Dawn Dearden, a spokeswoman for the U.S. attorney’s office in Manhattan, has declined to comment on the status of its investigation.
Spokesmen for Deutsche Bank, the Federal Reserve and DFS declined to comment.
The DFS opened its currency probe of Deutsche Bank and Barclays Plc in 2014, focusing on conduct using their electronic trading platforms. The regulator eventually expanded its investigation to four other banks operating in the U.S. under a state charter: Goldman Sachs Group, BNP Paribas SA, Credit Suisse Group AG and Societe Generale SA. Goldman Sachs and Credit Suisse declined to comment, and the other banks did not respond to requests for comment.
Overlapping currency investigations by law enforcement and regulatory agencies have ensnared several big banks. Five pleaded guilty in 2015 in connection with the Justice Department’s currency-trading probe -- Citigroup, JPMorgan Chase, Barclays, Royal Bank of Scotland Group and UBS Group AG.
Deutsche Bank was the largest participant in the foreign exchange market to escape Justice Department action.
The bank still has to contend with a civil suit against it and 15 other banks. In the suit filed in Manhattan, the plaintiffs allege currency rigging in online chat rooms where 22 currencies were discussed.
In one chat room open from early 2008 until late 2012, Deutsche Bank traders discussed the Canadian dollar and New Zealand dollar with traders from six other banks, according to that suit. The Justice Department had asked more than a year ago for certain details of the lawsuit to be made confidential to avoid disclosing information that could interfere with its own investigation.
Deutsche Bank was among nine banks that argued in court filings that that there wasn’t “a single specific factual allegation” that they conspired to manipulate benchmark currency rates.
On Monday the bank said it had received a letter from the Justice Department in February saying it had closed its criminal inquiry. The U.S. reserves the right, as it customarily does, to reopen the probe if more information emerges, Deutsche Bank said.
The Justice Department has also taken action against some individual currency traders. In January, former Barclays trader Jason Katz pleaded guilty to conspiring to manipulate emerging-market currency trades. A week later, prosecutors charged three ex-traders who used an online chat room called “The Cartel” to allegedly coordinate trading in U.S. dollars and euros. They have yet to make an appearance in court.
The Fed has banned from the U.S. banking industry two traders involved in the Cartel chat room: Christopher Ashton, formerly of Barclays, and Matthew Gardiner, who worked at UBS AG.
