Poor and ineffective processes and antiquated technology are contributing to performance failures at Germany’s largest bank1, according to inside reports. A radical change is being proposed with increasing emphasis being placed on risk management and regulatory compliance.
Deutsche Bank, which is already under intense scrutiny from regulators over missed performance targets and alleged money laundering, recently announced it had mistakenly paid $6bn to a hedge fund client, after a junior member of the bank’s forex sales team processed a gross value, rather than a net value2. The costly error added more zeros to the trade.
While the money was promptly recovered, Deutsche Bank has paid a high price for errors, inefficiency and misconduct in recent years. Since the end of the financial crisis, a series of fines, settlements, and restructurings have inflicted billions of euros in charges on the bank. In the past three years, it has paid around $9 billion to settle a Libor-rigging action and lawsuits over its underwriting of mortgage-backed securities, and its role in the collapse of the Kirch media empire. The need to continually add to its litigation reserves because of past exposure to risk is also hitting the bank’s profitability hard3.
To lift the bank’s reputation and profitability, John Cryan, Deutsche Bank’s co-CEO, has announced a radical overhaul of its services and senior management. Named Strategy2020, the plans aim to tighten the bank’s culture, sharpen its internal processes and improve its frayed relations with regulators. Executives who have had uncomfortable brushes with regulators are likely to leave, while those who value risk management and compliance as much as revenue growth may move up the ladder4.
While many changes are afoot as a consequence of Strategy2020, investment in IT including its virtualisation infrastructure and cloud adoption will play a major role in meeting the company’s goals5. Helping to improve visibility, efficiency and strengthen controls over the bank’s operations, the IT changes will also make the bank better able to monitor its performance and compliance status, deliver improved client services and meet its increasingly challenging regulatory needs.