Deutsche Bank (DB), facing billions of dollars in fines from the U.S. Deparatment of Justice and other regulators, is looking to claw back some of the millions it paid to the managers who landed it in its current state.
The German daily Sueddeutsche Zeitung reported that the bank is looking to reclaim tens of millions of euros in bonuses from its three most recent CEOs–Josef Ackermann, who ran the bank from 2002 to 2012, and his successors Anshu Jain and Jürgen Fitschen.
Reuters cited the bank as saying that it was still considering the matter and hadn’t made a final decision.
The amounts at stake–likely to be in the tens of millions of dollars–pale in comparison to the possible fine of $14 billion that the Department of Justice has said it wants to impose for Deutsche’s alleged fraudulent activity surrounding the sale of mortgage-backed securities before 2008. But, with the share price down over 80% in the past three years, with staff intensely unhappy at the savage job cuts announced over the past year, and with the government embarrassed at speculation that it may have to bail out Germany’s only bank of global stature, current CEO John Cryan is under enormous pressure to make sure that previous bosses share the pain.
The largest sum that could possibly be clawed back, 10 million euros ($10.7 million), affects Jain, who was co-CEO with Fitschen for three years between 2012 and 2015 (Fitschen stayed on till May 2016, when John Cryan took over as sole CEO). Jain had been co-head of Deutsche’s corporate and investment bank in the years leading up to the financial crisis.
As such, Jain carried a substantial, if notional, responsibility for the market activities that have landed Deutsche in such hot water as regulators, investors, and customers have turned on it in the last few years. He became sole head of the investment bank in 2010, a year in which he earned nearly 12 million euros compared to Ackermann’s 8.8 million.
German law has few provisions for clawing back money that has already been paid out to managers. However, it does allow ‘non-vested’ compensation to be suspended. That suggests that getting much money back from Ackermann, who left in 2012, will be especially problematic, as most of his bonuses, even the deferred portions, will already have been paid out. According to Sueddeutsche, Jain is the most exposed, with the bank looking at clawing back at least 10 million.
In Deutsche’s 2015 financial report, which including the bank’s biggest one year loss in its history, the supervisory board said it had already decided to suspend bonus installments that were to be paid in 2015, affecting 11 current and former managers.
Reuters said Jain declined to comment on the report. Ackermann was not immediately available for comment.
Deutsche was fined $2.5 billion in 2015 for rigging the worldwide market for short-term lending (and for obstructing the investigation into it by U.S. And European regulators), and had been fined 725 million euros for rigging Euribor, another interest rate benchmark, two years earlier.
Alongside with the potential DoJ’s suit, Deutsche is also under investigation for facilitating money-laundering by clients based in Russia, for which it has set aside an estimated 1 billion euros in provisions.
Deutsche’s share price has risen sharply in the wake of Donald Trump’s victory in the presidential election. That’s due largely to expectations of higher interest rates which will raise the profitability of all banks, but also because Deutsche has been a major lender to Trump’s real estate projects in the past. Some have speculated that such connections may lead to the DoJ fine being substantially reduced.
