Deutsche Bank warned over financial risks at London HQ

Leaked memo from the Bank of England reveals ‘significant concerns’

GeRMANy’S biggest bank was left red-faced last night after it emerged that British regulators have expressed ‘significant concern’ over its operations in the UK.

An internal document prepared by Deutsche Bank officials shows supervisors at the Bank of england are worried about the lender’s business model and how it would recover from a crisis.

The Prudential Regulation Authority (PRA) – the arm of the central bank that oversees Deutsche and other lenders – has also raised questions over risk management at the German giant.

The revelations are a major embarrassment for Deutsche at a time when foreign banks are trying to win business from their UK competitors ahead of Brexit.

It also marks a setback for British chief executive John Cryan, who is desperately trying to shore up Deutsche after it was last year branded the most dangerous bank in the world by the International Monetary Fund.

The Deutsche document – leaked to the Business Insider website – betrays fears that the PRA has about the German bank’s UK operations ahead of Britain’s departure from the european Union.

The concerns come as British regulators pore over the plans being drawn up by banks and other financial firms for Brexit. Deutsche’s chief operating officer in the UK, Tiina Lee, and chief accounting officer Karin Dohm met PRA officials on July 26 to discuss the bank’s plans for Brexit. This was followed by a letter from the PRA to Deutsche on July 31, just five days later.

A Deutsche summary of that letter says: ‘The PRA acknowledges the improvements made to UK oversight and governance and appreciates the regular engagement with DB management.

‘However, significant concern remains. PRA has shifted its supervisory priority to focus on preparation for UK branch authorisation and will focus on the areas of most concern – controls, business model and recovery and resolution, alongside known areas of material weakness, including liquidity risk management.’

The PRA and Deutsche declined to comment last night.

Cryan raised eyebrows in London this week when he said that Frankfurt is now battling New york and Singapore for UK banking jobs in the run-up to Brexit, having emerged as a clear winner among european cities.

He said that while financial hubs such as Paris, Amsterdam and Dublin would undoubtedly benefit from the UK’s post-Brexit exodus, none of them have the infrastructure to take a large portion of business from London.

‘For months there have been discussions regarding which location is set to profit the most once London is no longer within the european Union,’ the yorkshire-born banker said at this week’s conference in Frankfurt. ‘I cannot fully understand this debate because, as I see it, the race had already been won before it even began.

‘It’s not about a choice between Dublin, Paris or Frankfurt – it’s about a choice between New york, Singapore or Frankfurt.’

Deutsche is one of the world’s largest financial institutions, but is undergoing sweeping changes under Cryan’s leadership.

He is gearing up to replace a large chunk of its workforce with robots. This week he warned that a ‘big number’ of people, largely accountants, will lose their jobs at the firm as it automates to embrace its ‘revolutionary spirit’.

The Frankfurt-based company employs around 100,000 people around the world.