Deutsche Bank AG sold financial instruments that led to losses at a high-profile Spanish hotel chain, widening the circle of companies that have taken a hit from attempts to mitigate exchange-rate risks.
Palladium Group, co-owned by former Spanish Foreign Minister Abel Matutes Juan, has been hurt by complex foreign-exchange derivatives it bought from the German lender in recent years. The company is in discussions with lawyers as it evaluates options to recoup losses from the bank, according to a statement from Palladium.
The Ibiza-based hotel chain is one of between 50 and 100 cases that Deutsche Bank is looking into as part of an internal probe known as Project Teal, people familiar with the matter said, adding that it’s unclear how many of those companies lost money on the deals. The investigation is looking at how foreign exchange traders and sales people marketed highly complex products to companies that may not have fully understood them.
“We have a situation” with Deutsche Bank that’s similar to the one the lender faced with respect to Spanish winemaker J. Garcia Carrion, a spokesman for the hotel firm said in response to Bloomberg questions, without giving more details.
Abel Matutes Juan
Photographer: Juan Naharro Gimenez/Getty Images
JGC has previously made public the deep losses incurred from hedging products it bought from the German lender and other banks including Goldman Sachs Group Inc. and BNP Paribas SA.
Read More: Deutsche Bank Compensates Firm Over FX Derivatives Mis-Sales
“We do not comment on specific topics,” Deutsche Bank said in a statement. “We have confirmed that there is an ongoing investigation and the scope of this investigation is still appropriate. We follow up on any evidence and diligently look for any potential similar activity. We do not intend to comment further until all elements of the investigation are complete.”
The departures of several senior executives from Deutsche Bank, including Global FX Head Jonathan Tinker, is linked to Project Teal, Bloomberg News has reported. Other banks including Goldman Sachs and BNP Paribas face similar accusations of mis-selling derivatives in Spain, with JGC recently filing a complaint against Goldman with the U.K.’s Financial Conduct Authority.
Goldman Sachs, which is fighting the claims and has denied any wrongdoing, had already sued JGC in the U.K. in September in order to recover $6.2 million it says the Spanish firm owes it.
“For years J. Garcia Carrion S.A. profited without complaint from its use of FX derivatives with Goldman Sachs to manage its international currency exposure,” the bank has said in a statement.
Deutsche Bank under Chief Executive Officer Christian Sewing has been trying to draw a line under a decade of heavy fines and expensive settlements after various financial wrongdoings. He’s honing in on the final stretch of a four-year turnaround plan that seeks to boost the bank’s poor profitability and, consequently, its low valuation.
But the legal issues in Spain add to a recent string of control and risk management issues that have landed Deutsche Bank in hot waters with regulators and may ultimately lead to sanctions including higher capital requirements. It’s under scrutiny by the U.S. Federal Reserve for ongoing deficiencies in its controls, the German regulator Bafin recently expanded the mandate of its anti-money laundering monitor at the bank, and the European Central Bank wants it to rein in risk-taking at the leveraged finance unit, Bloomberg News has reported.
Palladium Group says on its website it’s the seventh-largest Spanish hotel business with 50 hotels and 12,000 employees. It was created by Abel Matutes Juan, a billionaire hotelier and head of the Matutes clan, who built the company from humble beginnings into an empire whose lodgings and nightclubs helped turn Ibiza into one of the world’s prime tourist destinations.
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July 15, 2021 at 05:44PM
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