Ooops! Too many zeros! To err is Human, right? We all make mistakes. I also recall making mistakes when i first worked in an Accounting office and i realised the balance sheet couldn’t balance because of an extra ‘zero‘ i mistakenly added.
However, a typo or an addition of some extra zeros was not just a logical banking error at the Deutsche Bank Ag in Summer, June 2015. It turned out to be a huge financial error with too many zeros, which exceeded the figure that was supposed to be wired. What an expensive mistake? But thank goodness the giant German Bank recovered their money from the US Hedge fund the following day. According to a Financial Times article by Martin Arnold and Katie Martin in London, a Junior member of the Deutsche Bank‘s trading team mistakenly transferred $6 Billion to a hedge fund client’s account in the US this year in June 2015. Although the ‘fat-finger’ error was reversed within 24 hours, the erroneous transaction is said to have been tied to a communications error where the junior foreign trader “misunderstood” instructions left by the client sales person who at the time was on leave. The article further reveals that Instead of processing a net value of trades, he processed a gross value and failed to offset the value. The bank reported the incident to the UK’s Financial Conduct Authority, European Central Bank and the US Federal Reserve.
Further eyebrows have been raised on this matter which according to FT, has raised many questions. For example, about Deutsche Bank’s Internal systems for watching huge transactions like that. Why was the error was not spotted under the “Four Eyes Principle” which in a business context, is a requirement that two individuals review and approve a business action or transaction before it can be taken? More questions have been raised about the bank’s operational controls and risk management.
A lot has been going on lately at Deutsche Bank AG especially on issues targeting leadership, restructuring, management, strategy and on top of it, joint resignations of the giant bank’s co- Chief executives, Jürgen Fitschen and Anshu Jain, which according to an article by Wall Street Journal, has left investors with questions about the future direction of the bank.
Nevertheless, since July 2015, the German bank which is now under new leadership with co-CEO John Cryan, is determined to work on improvement in areas technology, internal processes and it’s relations with it’s regulators. A full article about the Deutsche Bank $6bn “Fat Finger” error can be found here