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Deutsche Bank scraps research note accusing BaFin of serial failings

Deutsche Bank AG updates

Deutsche Bank has pulled a research report accusing German financial regulators and the country’s outgoing conservative-led government of serious failures less than two weeks ahead of the hotly contested federal election.

On Tuesday, Deutsche Bank Research, the bank’s macroeconomic think-tank, published a 20-page analysis outlining a “reform agenda for Germany’s financial sector” — it was removed just a few hours later.

The report, which was published in German and seen by the Financial Times, described an “almost unprecedented loss of importance” of German banks on the global stage over the past 15 years. It blamed regulators and policymakers for the decline.

The study accused the country’s regulators of failing to uncover scandals that rocked the financial industry, including the collapse of Wirecard and Greensill Bank as well as alleged misconduct that involved Deutsche Bank itself.

After the Wirecard scandal, the German government ousted BaFin’s leadership and strengthened the watchdog’s powers. New president Mark Branson, who was poached from the Swiss regulator Finma, started last month.

The report was removed from the website of Deutsche Bank Research late on Tuesday. Finanz-Szene.de, a banking newsletter, first reported the disappearance.

In a statement on Wednesday, the lender said the “views and opinions” expressed in the report represented those of the author. “These are not shared by Deutsche Bank and were not authorised by Deutsche Bank Research leadership,” it stated.

The report was authored by Jan Schildbach, a director at Deutsche Bank research, and edited by Stefan Schneider, the think-tank’s chief German macroeconomist. Both declined to comment through a spokesman.

“Deutsche Bank and Deutsche Bank Research distance themselves from the inappropriate criticism in substance and tone of regulators and policymakers which were expressed in the research report,” the bank said. BaFin declined to comment.

Last year, Deutsche Bank Research caused a public outcry when it argued in favour of levying a special tax on employees who work from home. Back then, the lender stood by its researchers, arguing that the think-tank operated independently from the bank.

“Generally speaking, the independence of our research is beyond all question,” the bank told the FT, adding that the decision to pull the report was taken by DB Research’s senior management.

Without directly referring to Germany’s largest lender, the report cited Deutsche’s own scandals — such as “money laundering, rate rigging, mis-selling of US mortgages or sanction violations” — as examples of regulatory failure and the decline of the country’s banking sector.

Deutsche Bank has already paid billions of euros in settlements, while 70 current and former employees, including board members, are under criminal investigation for their potential role in the cum-ex tax fraud, when investors fraudulently reclaimed dividend tax that was never paid.

“The previous set-up [of German financial regulators] has proven not fit for purpose, as a flurry of fresh scandals has shown,” the report said, lambasting BaFin for failing to uncover the misconduct and accusing it of lacking “real auditing qualities”.

The report also takes the German government to task over a perceived crisis of the pension system and what it characterises as excessive corporate taxation.

It says that “the election manifestos of the most important parties who are potentially part of the next government do not indicate that the government will forcefully tackle the structural sclerosis and the perennial decline of Germany’s financial sector”.

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