Focus: Deutsche Bank chief faces scrutiny about role in risky trades over a decade ago

Deutsche Bank CEO Christian Sewing faces renewed scrutiny over his 2013 role as chief auditor investigating risky derivatives trades, stemming from a €152 million lawsuit by former banker Dario Schiraldi. Schiraldi alleges he was scapegoated for deals tacitly approved by management, including Sewing, claiming significant reputational and financial harm. While Deutsche Bank denies wrongdoing, asserting its audit was thorough and found no issues, the upcoming December court hearing places Sewing, recently reappointed and credited with the bank's turnaround, under public examination regarding his past actions during a critical period, potentially impacting the bank's leadership perception and ongoing stability.

Analysis

Deutsche Bank and its CEO, Christian Sewing, are facing renewed scrutiny over legacy conduct through a €152 million lawsuit filed by a former employee, Dario Schiraldi. The suit alleges that an internal audit overseen by Sewing in 2013, when he was chief auditor, scapegoated junior bankers for complex derivatives trades to conceal management's tacit approval. This legal challenge, scheduled for a Frankfurt court hearing in December, places Sewing's past actions directly in the spotlight, contrasting with his current image as the architect of the bank's successful turnaround and recent reappointment. While Deutsche Bank maintains that its audit was thorough, an internal review found no wrongdoing, and the Supervisory Board has voiced its support, the public resurfacing of these allegations constitutes a notable governance and reputational risk. The acquittal of the bankers in a related 2022 Italian case does not preclude potential damage from this civil litigation, which specifically questions the integrity of the firm's leadership during a critical period.

Key Decisions for Investors

• Investors should closely monitor the progress of the lawsuit, with the December court hearing serving as a key catalyst; an unfavorable outcome or a significant settlement could undermine confidence in the current leadership.
• This event warrants a re-evaluation of the governance risk premium assigned to Deutsche Bank, as the allegations directly challenge the historical conduct of the CEO who is central to the bank's recovery narrative.
• While the €152 million claim is not financially material to Deutsche Bank's balance sheet, the primary risk lies in potential reputational damage and the distraction it may cause for senior management.