* Deutsche Bank management faces questions from directors
* Supervisory Board to probe claims of misvalued derivatives
* Deutsche Bank has said claims are unfounded
* D. Bank, German regulator decline to comment on Friday
(Adds detail on risk committee, BaFin and SEC comment)
By Edward Taylor and Arno Schuetze
FRANKFURT, Dec 7 Deutsche Bank's
directors will question the management board over claims the
lender failed to recognise billions of euros in unrealised
losses during the financial crisis, two sources said.
The supervisory board, which has 20 independent directors
"is seeking answers from management", a person familiar with the
body said on Friday.
Deutsche Bank has rejected the claims, which resurfaced this
week, as unfounded.
The risk committee on the board of directors is set to
discuss the matter when it holds a regular meeting before
Christmas, another source close to the bank said.
The demand for clarification comes after law firm Labaton
Sucharow LLP said Eric Ben-Artzi, a former quantitative risk
analyst at Deutsche, used a whistleblower programme to tell the
U.S. Securities and Exchange Commission (SEC) the bank failed to
report the value of its credit derivatives portfolio correctly
from 2007 through 2010.
The topic of valuations will also be discussed at the next
full supervisory board meeting in late January, a second person
familiar with the supervisory board's thinking said on Friday.
Deutsche Bank declined to comment on whether the supervisory
board was demanding answers from management.
The general nature of the allegations about disagreements
over valuation of credit derivatives was known and had been
discussed by the supervisory board in the past, the second
Supervisory board chairman Paul Achleitner briefed fellow
directors and told them the internal investigations of the
matter had finished and, for the bank, the case belonged to the
past, a third person familiar with the supervisory board's
Reports by media including the Financial Times this week
alleging the bank failed to recognise up to $12 billion of
unrealized losses during the financial crisis raised "some new
questions about the magnitude," the first source familiar with
the supervisory board's thinking said.
The figure could not be independently verified by Reuters.
The SEC declined to comment.
Deutsche Bank said it was cooperating with the SEC and added
that the allegations, which it noted were more than two and a
half years old, "have been the subject of a careful and thorough
investigation, and they are wholly unfounded."
"Moreover, the investigation revealed that these allegations
stem from people without personal knowledge of, or
responsibility for, key facts and information," the bank added.
In June 2011, Reuters reported on a Sarbanes-Oxley
whistleblower action filed against Deutsche Bank in May 2010
alleging that some of the assets in a derivatives portfolio may
have been improperly valued in order to hide trading losses.
In an internal presentation given by Bill Broeksmit, head
of risk and capital optimisation at Deutsche Bank in June 2011,
Deutsche Bank said it had been able to unwind a large portion of
its credit derivatives portfolio without taking heavy losses, a
sign that some buyers had broadly accepted Deutsche's view on
how to value certain assets.
German politicians have nonetheless called for markets
regulator BaFin to investigate the claims and suggested it had
not acted forcefully enough on the issue.
BaFin on Friday declined to discuss allegations against
Deutsche Bank and rejected suggestions it may have neglected its
duties of supervision.
(Reporting by Edward Taylor, Arno Schuetze and Philipp
Halstrick, Jonathan Gould; Editing by Helen Massy-Beresford)