Wednesday 23 October 2019

ECB considers probe of Deutsche Bank's 'bail-in' bonds

Deutsche Bank HQ. Photo: Bloomberg
Deutsche Bank HQ. Photo: Bloomberg

Tom Sims and Patricia Uhlig

The European Central Bank (ECB) is examining whether to open a formal investigation into Deutsche Bank for allegedly buying some of its own debt without authorisation, two sources said yesterday.

The alleged offence, which could result in a fine if the bank is found to have broken rules, comes as Germany's biggest lender tries to improve its reputation with investors and relationship with regulators.

Deutsche Bank and the ECB declined to comment.

The securities concerned are AT1 and AT2 bonds, so-called 'bail-in' bonds.

The bonds, which emerged after the financial crisis, are designed to protect taxpayers from potential bailout costs if a bank runs into hardship by putting the risk in the hands of the holders of the bonds.

However, it may defeat the purpose if the bank itself holds the bonds.

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