It would be easy to trivialise the comments of Colin Fan, co-CEO of Deutsche Bank, who has “lost patience” with “boastful, indiscrete and vulgar” behaviour and indeed some media outlets have. The thing is though, this seems to me to be just the latest effort on the part of the bank to cleanse itself – in fact I would argue Deutsche has been tougher on its staff than any other institution.
It is significant that while many banks have suspended staff tainted by the Fix scandal and the discoveries of inappropriate instant messaging chats, Deutsche Bank has been tougher. It has fired more people than the other banks, not necessarily because it is involved any more than its peers, but because it is taking a zero tolerance line to such behaviour – Mr Fan’s comments are merely the latest iteration of that (even though they were made earlier this year).
The real number of people dismissed or suspended over the Fix will never probably be known. We know of some 30-odd people directly associated with the issue, but there are several others who left the industry last year that were, according to my sources, also involved in “inappropriate behaviour".
But is Deutsche really acting over the Fix? I have mentioned before that most of those actually dismissed by all the banks have not been directly implicated in the Fix issue, rather they have been dismissed for what could euphemistically be termed “extra-curricular” comments on the chat rooms – comments that were uncovered during the Fix investigation.
The Fix remains an issue of collusion, insider dealing and, possibly, front running. What we seem to be talking about here, and in Mr Fan’s video, is a case of people forgetting they are in a public environment on these chat rooms. After all, is there a bank in the world that does not fulfil the compliance requirements when it comes to equality issues? We all know there are things you can and cannot say – one has to question the culture of a firm and the intelligence of some of its people when they have to be reminded so forcefully.
Of course the rules on being indiscrete especially in public communications have been in place for years – ACI’s Model Code specifically discusses it and lays out best practice guidelines, and banks’ internal guidelines also cover it.
So what we also have here is a breakdown in oversight on the part of banks’ management and compliance functions. I was asked last week if I thought the Fix issue “went higher” at the banks. My considered answer was, “Directly? No. Indirectly? It has to.”
Deutsche Bank is to be congratulated for reiterating that certain behaviours are unacceptable, however one has to ask why it wasn’t already the culture? The same can be said for other banks. Management – and I want to stress that not everyone leaving banks is doing so because of inappropriate behaviour – was rarely involved directly in what may or may not have gone on around the Fix, but collectively it took its eye off the ball. This realisation is why we are seeing the start of what I would call the collateral damage period, wherein people indirectly related to the Fix issue start to be impacted by the consequences of a lack of adequate oversight.
On a wider front, it looks very much to me like we have two separate developments here. I have to stress that no formal accusations of wrongdoing around the Fix have been made at this stage, but one cannot escape the feeling that those suspended have been due to suspicions over activity around the Fix and are likely to face some form of legal action. Those that have been dismissed, however, have been found to have broken explicit rules about what you can, and cannot say, in public interactions, but slightly perversely perhaps, are very unlikely to face further legal action.
This may sound a little pedantic but there is a serious point. One group are unlikely to ever be employed in the markets again, even if they are not charged; whilst the other can be seen as someone who made a serious error of judgement, but legally is clean.
Colin_lambert@profit-loss.com Twitter @lamboPnL