"You may not realize it, but right now, because of regulatory scrutiny, all your communications may be reviewed. This includes your emails, your conversations and your conduct."
This was the message Detusche Bank traders received from the co-head of investment banking, Colin Fan, in a video distributed to its sales and trading employees of its investment bank. Fan said that "some of you are falling way short of our established standards" and that "being boastful, indiscrete, and vulgar is not OK. It will have serious consequences." The video was first posted by the Financial Times Friday morning.
Renee Calabro, Deutsche Bank spokesperson confirmed the veracity of the video and said in a statement: "A new culture is taking hold, step by step, here at Deutsche Bank. The substance and tone of this video is intentionally direct and part of an ongoing program. We expect every employee to understand and comply with our standards."
Deutsche Bank has been stressing the need to change its culture to win back the trust of regulators and clients. In an interview the bank published in March, its head of compliance and regulatory affairs Stephan Leithner said, "No banking system can work without trust. That trust was lost during the financial crisis. Now we have to earn it back again. That is the challenge — and we as Deutsche Bank are actively facing it."
The warning for its traders comes at a time when several financial institutions have attracted regulatory scrutiny and have had to pay out in massive settlements partially based on emails and other digital communications from its employees. In response, banks are more aggressively collecting and logging communications and have even started to ban employees from participation in group chat rooms with other traders.
A young Goldman Sachs banker, Fabrice Tourre, was found liable for fraud by the Securities and Exchange Commission for his role in selling complex mortgage securities without disclosing to investors that a well-known hedge fund manager would profit if the securities failed. In emails first dug up by the U.S. Senate, Tourre referred to himself as "Fabulous Fab" and described himself as "standing in the middle of all these complex, highly leveraged, exotic trades he created without necessarily understanding all of the implications of those monstrosities!!!" Goldman would settle with the SEC and pay a $550 million fine.
In another famous cache of emails and instant messages, a Barclays trader told a colleague responsible for Barclays submissions for LIBOR, a reference interest rate that underlies trillions of dollars worth of securities: "Dude. I owe you big time! Come over one day after work and I'm opening a bottle of Bollinger," after he submitted information that would assist the Barclays trader's position. Barclays would pay $453 million to British and American regulators for its role in manipulating LIBOR and its CEO Robert Diamond left the bank.
"I have lost patience on this issue," Fan said in the Deutsche Bank video. "Communications that run even a small risk of being seen as unprofessional stop right now."
Deutsche Bank paid just under $1 billion to European regulators for its role in LIBOR rigging, the largest single penalty for a bank.
"Think carefully about what you say about how you say it," Fan said, concluding the video. "If not, it will have serious consequences for you personally.