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The logo of Deutsche Bank is seen at its headquarters in this file photo. (RALPH ORLOWSKI/REUTERS)
The logo of Deutsche Bank is seen at its headquarters in this file photo. (RALPH ORLOWSKI/REUTERS)

ECB eyes review of Deutsche Bank shareholders: source Add to ...

Europe’s top banking regulator, the European Central Bank, is considering carrying out a review of Deutsche Bank’s two largest shareholders, a regulatory source said on Monday.

The ECB may launch so-called ownership-control procedures to scrutinize Qatar’s royal family and China’s HNA, which each owns just under 10 per cent of Germany’s flagship lender.

“That the ECB is investigating or considering to investigate the shareholdings is indeed accurate,” said the person, speaking on condition of anonymity because the person was not authorized to speak publicly about a review that is ongoing.

News of the possible review was first reported by the Sueddeutsche Zeitung on Sunday.

The ECB, Deutsche Bank and HNA declined to comment. A spokesman for the office of Sheikh Hamad bin Jassim bin Jabr al-Thani in Qatar was not immediately available to comment.

The German finance ministry said it had taken notice of reports of the possible review but declined further comment.

The motivation for a review remains unclear. Generally such an assessment aims to establish whether an investor is trustworthy and financially sound, determine the source of investment funds and find out whether an investor engages in any criminal dealings such as money-laundering or terrorism financing.

“The approval process aims to ensure that only suitable shareholders enter the banking system in order to prevent any disruptions to the smooth functioning of the banking system,” the ECB’s website says.

Normally, the review takes place once a holding reaches 10 per cent of shares or voting rights. But it may also take place if there is “significant influence over the management of the bank,” the ECB’s website says.

Both Qatar and HNA have been granted a seat on the Deutsche Bank board.

HNA, which has been on a global shopping spree in past years, began acquiring its Deutsche stake this year in multiple steps, saying the bank’s shares were “substantially undervalued and are an attractive investment,” according to an SEC filing.

The purchase was financed by UBS and the holding is in a special fund managed by the Austrian asset manager C-Quadrat. Quadrat chief Alexander Schuetz sits on the Deutsche Bank board.

A spokesman for C-Quadrat said the asset manager was unaware of any possible review by the ECB.

Qatar’s royal family built up its stake first in 2014 during a capital increase. Lawyer Stefan Simon represents Qatar on the board.

Qatar is under political and economic pressure, with neighbours including Saudi Arabia accusing it of terror financing and cosying up to Iran, a country other Gulf Arab states have long viewed with suspicion.

Deutsche Bank sees the HNA and Qatari stakes as a vote of confidence that should encourage other investors, big and small.

In May, German regulator BaFin welcomed the HNA investment. “We believe it is fundamentally positive that capital is being invested in German banks. This of course includes foreign capital and of course Chinese capital,” BaFin President Felix Hufeld said at the time.

A negative outcome of a review could result in the ECB prohibiting the shareholder from exercising its voting rights.

The process underway does not indicate any wrongdoing, though it does come at an awkward time for Germany’s largest lender.

Deutsche Bank is grappling with a strategic turnaround, an uncertain global economy and the impact of Britain’s departure from the European Union.

In addition, the bank is recovering from multiple legal battles and has paid billions in fines and settlements for cases ranging from its role in marketing of U.S. mortgage-backed securities to a so-called “mirror trading” scheme that could be used for money laundering.

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