The regulator has criticised Deutsche Bank over its FX swaps oversight, with a supervisory team warning the bank that it must improve its oversight for FX derivatives business pitches.
The bank recently completed its own internal investigation on the issue, Project Teal, following allegations that it mis-sold some FX derivatives to Spanish firms. But (as first reported by Bloomberg), a supervisory team from the European Central Bank (ECB) has warned the bank that it must improve its checks and balances yet further when it comes to pitching FX derivatives – including swaps – to European businesses, to make sure they are aware of all the associated risks.
The concerns highlight an ongoing issue in the FX markets around the absence of consistent and accurate data – an issue that is becoming increasingly urgent.
“This investigation by the ECB shines a light on longstanding issues around the completeness and accuracy of data in the FX swaps market,” said Oliver Blower, formerly of Barclays and Bank of America Merrill Lynch, now CEO of fintech firm VoxSmart, speaking BEST EXECUTION.
“While ordering a charge around one specific incident is all well and good, it is difficult to gauge exactly how many financial institutions are failing to communicate their swaps trades to clients in a fair and balanced manner.
“The challenge in these markets is that most trades are executed over the counter (OTC) via voice. This is particularly problematic for investment banks who, more often than not, have their swaps trade and communication data residing in two entirely separate buckets.
“The manual process of sifting through disparate data sets from multiple phone calls and connecting the dots between swap trades, particularly during unpredictable bouts of market volatility, is a major headache.”
Deutsche Bank declined to comment when contacted by BEST EXECUTION.
©Markets Media Europe 2023
