Deutsche loss in high court battle

DEUTSCHE Bank has been ordered to fork out €541,000 (£469,000) in compensation to a German paper company after the country’s highest court ruled that the bank had inadequately described the risks of a derivative it sold the firm in 2005.

The case paves the way for dozens of potential losses in court for the bank, with 17 similar cases working their way through the German justice system regarding Deutsche.

The bank said that the financial implications of the cases still in progress are “very limited”, but would not give an estimate for how much they might cost.

The judge in the case, Justice Ulrich Wiechers highlighted the conflict between the bank’s self-interest and that of its customers in selling derivatives. He ruled that Deutsche had a duty to explain not only the basic maths behind the swap it was selling, but the implications: “Just because I can read a poem does not mean I have understood it,” he said.

Aside from having a knock-on effect on other derivatives cases for banks in German courts, the ruling could affect EU?legislation being drafted on derivatives.

Tony Anderson, partner at law firm Pinsent Masons, said: "The case continues the political and legal focus on derivatives and the role banks have as central counterparties."

He added that the reputational damage could influence regulators.