Germany’s financial watchdog has ordered Deutsche Bank to do more to ensure that commodity prices cannot be manipulated by its traders, in the latest sign that authorities believe some of the world’s largest markets are open to abuse.
Deutsche received a letter from BaFin in April following a probe by the German regulator that found there were faults in controls surrounding the reporting of commodity prices, say people familiar with the probe.
BaFin’s move comes as regulators scrutinise a string of financial reference rates, including the gold price, after global probes into Libor and foreign exchange rates found evidence of attempted market rigging by a large number of institutions.
The development comes just months after Deutsche announced that it was significantly scaling back its commodities arm amid increased regulatory and capital costs that have made the business unattractive.
The lender has since shut down some trading desks and transferred some other commodity businesses to a non-core bank where they will be wound down or sold off.
Deutsche said: “We continue to co-operate with authorities in their industry-wide review of certain benchmarks and are investing to further improve our control environment.”
BaFin declined to comment.
Commodity prices across a range of markets such as oil and thermal coal are collected by external agencies such as Platts, which base their prices on numbers reported by banks and other parties. BaFin’s probe at Deutsche studied the risk controls in place at the bank for managing and supervising how prices were submitted.
The warning from the German regulator comes as Brussels continues to investigate the setting of physical oil prices.