The case that won't go away: ECB reportedly investigates allegations of financial irregularities at Deutsche Bank

By Jules Rimmer

One of Europe's largest banks accused of understating its leverage and overstating its financial strength to regulators.

A dispute that began at Deutsche Bank as far back as 2013 is still rumbling on.

And now, according to reporting by the Financial Times, the European Central Bank is investigating allegations that Germany's largest lender, Deutsche Bank, repeatedly misrepresented the strength of its balance sheet and distorted its financial soundness to regulators.

Deutsche Bank rebutted the allegations in a statement, maintaining it applies "netting in accordance with the relevant accounting standards and generally aligned with common industry practice."

The accusations of financial irregularities have been leveled by a former employee, Dario Schiraldi, currently in the process of suing Deutsche Bank for EUR152 million. He claims that Deutsche Bank misused "netting" practices that allow banks to offset credit risk exposure, thereby inflating the bank's capital and leverage ratios. He contends this understated Deutsche Bank's leverage by over EUR200 billion last year. For perspective, Deutsche Bank's total leverage at the end of the third quarter this year was EUR1.3 trillion.

The ECB declined to comment and said its policy is never to comment on individual banks. Several weeks ago Bloomberg was reporting it had seen correspondence between Schiraldi's lawyers and the ECB in which they listed several areas requiring "supervisory attention."

Deutsche Bank can be considered as having a generally robust balance sheet with a Common Equity Tier 1 ratio, the standard metric for capital strength, of 14.5%, way in excess of the minimum requirement demanded by European regulations and Deutsche Bank's own internal benchmarks.

At the heart of this controversy is Deutsche Bank's role in an accounting scandal involving the Italian Banca Monte dei Paschi (IT:BMPS) . Six former employees of Deutsche Bank, including Schiraldi, were originally convicted for their part in a fraud in 2019 before being acquitted on appeal in 2022.

Schiraldi's suit against Deutsche Bank, filed in Frankfurt, accuses Deutsche Bank's chief executive officer, Christian Sewing, of overseeing an unreliable internal audit that became a central part of the case against those six former employees.

"Deutsche Bank considers the legal claims by former employees in this matter to be entirely without merit," a spokesperson maintained.

The controversy is the latest in a series to buffet Deutsche Bank in the last decade or so. Deutsche Bank has been caught up in scandals involving the rigging of Libor, Jeffrey Epstein, Donald Trump, Russian mirror trades, and money laundering. Nonetheless, Deutsche Bank shares recently made a ten-year high and its stock has rebounded almost sixfold from its pandemic lows in 2020.

In Tuesday morning's trading it was 0.58% lower. Its New York-listed depositary receipts (DB) have almost doubled this year.

-Jules Rimmer

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11-25-25 0631ET