Deutsche Bank Opaque Loans From Brazil to Italy Hide Risk

Deutsche Bank AG (DBK), perennially among the top three in global credit markets, made billions of dollars of loans to banks worldwide since 2008 and accounted for them in a way that obscured their continuing risk to investors.

Germany’s largest bank managed to lend to firms from Brazil to Italy while making the transactions disappear from its balance sheet, even though it still is owed the money, according to four people with knowledge of the practice and internal documents provided to Bloomberg News.

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Deals totaling 2.5 billion euros ($3.3 billion) involving Italy’sBanca Monte dei Paschi di Siena SpA and Banco do Brasil SAreveal a technique that obscured Deutsche Bank’s lending reach when it sent cash to the banks, the documents show. The company had talks about a similar loan to Dexia SA (DEXB) weeks before that firm was rescued, according to the documents, and it used the same accounting for other deals through 2011, two of the people with knowledge of the transactions said.

“We should be very concerned about the opacity and complexity of these transactions,” said Joshua Rosner, an analyst at research firm Graham Fisher & Co. in New York who warned in early 2007 that securities linked to subprime loans posed risks to the economy.


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