Deutsche Bank fined nearly $1 mln by Korea Exchange
2011-02-25 16:59:23
South Korean brokerage unit was fined nearly $1 million by the country's exchange operator, the largest it has ever imposed, for failing to notify it on time about big derivative trades.
The fine marks the latest blow to the bank's reputation in Korea, at a time when the lender is counting on the Asia-Pacific region to deliver around 4 billion euros in revenues by 2011 from around 2.1 billion euros in 2008.
Wolfgang Gerke, a professor of finance, on Friday told Reuters that while the bank's global reputation was unlikely to suffer in the long run, "it is certainly not trivial on a regional level."
The Korea Exchange decision follows a ruling by the country's financial regulator on Wednesday that the Deutsche unit manipulated the stock market through massive derivatives trades on last Nov. 11, triggering a market tumble.
Deutsche Bank did not provide a breakdown of earnings for its Korean operations and referred to a broader regional breakdown of revenues published in its annual report.
In 2009, Deutsche's corporate and investment bank generated 2.67 billion euros in revenues from the Asia-Pacific region excluding Japan compared with the almost 28 billion the bank made globally.
Korea's Financial Services Commission had previously said Deutsche made $40.1 million in improper profits by manipulating the stock market and suspended some of its operations for six months. [ID:nTOE71L035]
On Friday the Korea Exchange called for one Deutsche employee to resign or be suspended, and that two other employees at the firm be demoted or reprimanded.
"Deutsche failed in its duty to notify the Korea Exchange on time about its programme trades, hurting investor trust in our regulatory system and causing confusion ," said Lee Cheol-jae, an executive director of the exchange's Market Oversight Division.
"Deutsche Securities Korea deeply regrets the KRX action, however it respects its decision to impose such penalties," the German bank said in a statement.
Michael West, head of communications for Deutsche Bank in Asia-Pacific, said the bank would not be "making any comments in relation to our employees."
"KRX will not take any actions on profits Deutsche made. Prosecutors may deal with it, however," said bourse spokesman Won Young-joon.
The FSC has decided to take five Deutsche employees to prosecutors for investigation.
'UNFAIR PROFIT'
Deutsche was one minute late in informing KRX about the large sell order coming from its accounts, according to the bourse.
The exchange also said the firm made "unfair profit" after buying a massive volume of put options and subsequently issuing sell orders for stocks worth around 2.4 trillion won.
The fine is the largest levied by the Korea Exchange on a brokerage, with the previous record being a 250 million won penalty imposed on Kiwoom Securities in June, 2009.
The KRX on Friday also issued a warning to Hana Daetoo Securities for providing margin deposits on derivative trades late.
A local fund management firm, Wise Asset Management Co, saw losses of around 89 billion won due to the Nov. 11 market plunge. Hana Daetoo, which traded put options for Wise Asset, shouldered 76 billion won of those losses.
Record foreign selling including from Deutsche accounts minutes before the market closed on November 11 led to a 53-point drop in the KOSPI amid options expiry.