Incorrect Stock Exchange Transaction Costs DWP Bank Annual Profit
The bad news from DWP Bank is unusual. Shareholders of Germany’s largest securities bank – Central Institute of Volkswagen und Raiffeisenbanken DZ Bank own 50 percent, the other half is held by savings banks – but now have to prepare for a dividend loss for 2022. According to preliminary information, the complex certificate business caused damage of 60 million euros to DWP Bank. That’s more than pre-tax profit in 2021, when the securities processor made around €57m.
“We can fully fund the business from the 2022 annual result, but the result will remain positive,” a DWP Bank spokesperson said on Wednesday, adding that the incident had no negative impact on the bank’s operations or on its clients.
The Internet portal “Finanz-szene” was the first to report the erroneous stock exchange transaction that took place at the end of December. This is a very complex transaction that involves dividing the certificate by the price of gas. The ratio of exchanging 17,000 old titles for one new paper was extraordinary.
The exchange date has also been moved from Friday to Monday. As a result, according to DWP Bank, “the certificate block in the wallet didn’t last long enough.”
The Private Agent earns Several Million
As a result, the private securities account customer was able to buy many certificates at the old price and sell most of them at the new, much higher price. Given the exchange ratio of 17,000 to one, he should have won several million euros with his original investment of an average four-figure amount. It would be understandable if this customer wasn’t interested in reversing the deal.
DWP Bank notes that it responded quickly after the order was served and was still able to block part of the execution. However, not all requests can be stopped within the few minutes that would otherwise be available.
The client placed several orders on different exchanges in quick succession, most of which were rejected. However, before ordering exchanges.
In contact with the FSA
DWP Bank attributes the damage to a series of unfortunate circumstances, including the unusual split of securities, the postponement of the exchange date, and thus also the extremely complex structures in the handling of securities.
DWP CEO Heiko Beck still has to be prepared for unpleasant questions from shareholders, because they are now threatened with a dividend loss.
Meanwhile, the institute has contacted the Federal Financial Supervision Authority (BaFin) about the incident. The spokesman stated that the constructive talks and trust.
“But we cannot, for example, say anything more specific about whether a custody account customer acted abusively or unacceptably,” he added.