Friday, June 24, 2005

Deutsche Bank accused by South Korea of irregularities

by Brian Turner

Deutsche Bank, Germany’s largest bank, could be suspended from engaging in derivatives trading in South Korea if a government regulatory agency in that Asian nation has its way.

The bank stands accused of not providing adequate warnings to state-run companies on the risks inherent in derivatives contracts.

One contract in question was a currency option Deutsche Bank signed with Korea Highway Corp, a deal was worth Won115.5 billion ($114 million).

Financial Supervisory Services officials would not estimate the losses they believe likely on the contract, and an official with Korean Highway Corp said that there had been no irregularities with the contract, that there had been a warning on risks, and that the company is making a profit on the deal.

The allegations come out of a tax investigation into foreign private equity funds operating in Korea that included not only Deutsche Bank but BNP Paribas, Barclays Capital, and JP Morgan.

The investigation, which has been criticized as the beginning of a crackdown on foreign capital, began in February and looked into whether the banks had signed derivatives contracts with state-run companies that contained terms unfavorable to those Korean companies, and whether they had been warned of the risks posed by the deals

 

 

 

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