Deutsche Bank AG
) has agreed to pay a penalty to the U.S. Federal Energy
Regulatory Commission (FERC) over alleged manipulations in the
Ca. electricity markets in 2010. The settlement also requires
this bank to execute better compliance measures.
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Deutsche Bank will pay a civil penalty of $1.5 million to the
FERC within 10 days. Further, the bank has agreed to surrender
$172,645 worth of profit along with interest for influencing the
Ca. power markets between Jan and Mar 2010.
As per FERC, Deutsche Bank Energy Trading LLC - a wing of
Deutsche Bank - had violated the anti-manipulation rule by
engaging in a scheme, in which the energy arm entered into
physical transactions to boost its own financial position.
According to the Office of Enforcement of the FERC, these
physical transactions sullied the proper functioning of the
California Independent System Operator (California ISO) markets.
Further, FERC accused the bank of infringing the regulations
requiring companies with market-based rate authority to provide
Though the bank has agreed to pay the penalty, it is yet to admit
or deny these accusations. In Nov 2012, Deutsche Bank was willing
to challenge these accusations in the court. However, it is
likely that the bank discarded the idea as the cost of litigation
exceeded the settlement amount.
The abovementioned settlement is the latest win for the regulator
that has come down hard on unwarranted trading activities by the
companies. The company has also proposed a $470 million penalty
) and prohibition of six months for
JPMorgan Chase & Co
) energy arm from some of the power markets on the grounds of
It is a prudent move by Deutsche Bank to settle the charges
instead of opting for a litigation, which may have added to its
already high expenditures.
Currently, Deutsche Bank retains a Zacks Rank #4 (Sell). However,
another foreign bank stock that is performing well and can be
recommended for investment purpose is
Banco Macro S.A
), which carries a Zacks Rank #1 (Strong Buy).