ECB reviews claims Deutsche Bank downplayed financial risks, FT reports

The European Central Bank is examining claims that Deutsche Bank underplayed risks in its balance sheet and gave a misleading picture of its financial health, the Financial Times reported on Tuesday.

The ECB is reviewing allegations made by former employee Dario Schiraldi, who is suing the bank, including claims about Deutsche’s use of so-called netting practices, the report said, citing people familiar with the matter.

According to the report, the banking watchdog has made enquiries to the German lender about its netting practices in recent months as part of an assessment of the bank’s application of capital rules and collateral treatment.

Netting is a process of consolidating and offsetting multiple financial obligations that banks use to lower their credit risk exposure and the calculation of their regulatory capital requirements.

The ECB has not yet decided whether to take any formal action in response to Schiraldi’s allegations, such as launching an investigation, the report said.

In his letter to the ECB, Schiraldi said that Deutsche’s balance sheet was “materially affected by aggressive netting and off-balance-sheet accounting techniques”, FT reported.

He said that this practice had led to the “apparent understatement of leverage exposures by over €200bn” in Deutsche’s 2024 financial statements, the newspaper added.

Deutsche told FT that it applies netting in accordance with relevant accounting standards, generally aligned with common industry practice.

Reuters could not verify the report. The ECB and Deutsche Bank did not immediately respond to requests for comment outside business hours.