- Deutsche Bank lost $US1.6 billion on an investment in a portfolio of municipal bonds and related derivatives, according to The Wall Street Journal.
- In 2007, the bank bought a $US7.8 billion portfolio of municipal bonds, the report said. The following year, Deutsche purchased default protection from Berkshire Hathaway.
- After almost a decade, Deutsche Bank offloaded the bonds in 2016, incurring $US1.6 billion in losses, the report said.
Deutsche Bank lost $US1.6 billion on an investment it made ahead of the 2008 financial crisis, according to a report from The Wall Street Journal.
In 2007, the bank bought a $US7.8 billion portfolio of municipal bonds. A year later, the German lender purchased default protection from Warren Buffett’s Berkshire Hathaway for the investment, paying $US140 million up front for the transaction.
Internally, Deutsche Bank’s executives had debated over the valuation of the bonds after the purchase, the report said. Financial auditors from KPMG also questioned whether the bank had set aside sufficient funds in case of losses, but the bank shrugged off those concerns, according to the report.
Deutsche Bank eventually decided to offload the bonds and related derivatives nine years after the purchase.
“This transaction was unwound in 2016 as part of the closure of our Non-Core Operations” unit, a bank spokesman told The Journal in an email. “External lawyers and auditors reviewed the transaction and confirmed it was in line with accounting standards and practices.”
Executives at Deutsche Bank never decided to restate its financial statements to include the losses before an internal investigation closed last year, the report said.
- Read more
- JPMorgan is building a cloud engineering hub in Seattle minutes away from Amazon and Microsoft, and it’s planning to hire 50 staffers this year
- Pimco and DoubleLine Capital are players in a tug-boat investment gone bad – and their struggles highlight the dark side of credit markets
- Human resources is the next battleground for Wall Street wealth advisers as Morgan Stanley and Goldman Sachs jockey over new turf
Business Insider Emails & Alerts
Site highlights each day to your inbox.