Deutsche Bank’s precious metals trading has ceased due to an investigation of their alleged abuse buying and selling physical commodities. Declining profits and pressure from regulators has multiple banks disposing of or minimizing their commodities trading business operations, including JPMorgan Chase, Barclays, Morgan Stanley, UBS, and the Royal Bank of Scotland.
Representatives from the bank released a statement earlier, “Following on from last year’s decision to exit most physical commodities, Deutsche Bank’s corporate banking and securities business is reducing its physical commodities business by winding down its physical precious metals trading operations. Our financial derivative offering for precious metals remains unchanged.”
The bank’s commodity trading activities have been under heavy criticism for quite some time now. The U.S. Federal Reserve set plans into motion limiting the bank’s handling of physical commodities including oil and natural gas. This is after the U.S. Senate subcommittee of investigations reported unsettling commodities activities and urged regulators to suppress any further action. BaFin, a German regulator, sent Deutsche Bank a letter back in April citing faults in lender’s internal controls around the reporting of commodity prices.
BaFin is one link in a chain of regulatory scrutiny regarding Deutsche Bank’s financial reference rates, including gold prices. Investigations found evidence of attempted market rigging with Libor and foreign exchange rates by a number of institutions. This recent development came to light after Deutsche Bank announced its commodities rescaling nearly one year ago. The rescaling hit most commodities except for precious metals. One top consultancy, Coalition, estimated a fall to $4.5bn in commodities revenues last year for the top 10 banks. 2008 revenues were set at $14.1bn.
BaFin has another investigation in motion regarding Deutsche Bank’s possible manipulation of gold and silver prices. The Frankfurt-based company will continue to operate in some precious metals, but has been urged to conduct its own investigation into possible price manipulation activities. The bank’s precious metals trading branch that is being shut down operated in London with 5 employees. In January, Deutsche put its seat for gold and silver daily price fixing up for sale. After failing to find a buyer, they withdrew from both seats in April.
