Watchdog blocks Deutsche unit sale

DEUTSCHE Bank was forced to scrap the sale of its subsidiary BHF to Liechtenstein bank LGT yesterday after the German financial regulator blocked the deal on tax evasion concerns.

Sources familiar with the situation told City A.M. that watchdog BaFin had doubts over the reliability of LGT’s funding sources given its history of probes for tax evasion.

LGT, which had targeted BHF mainly for its wealth management arm, said it had decided “not to pursue this complex transaction” following discussions with BaFin.

LGT has been under German regulators’ spotlight since 2008, when client data stolen from it revealed that former Deutsche Post chief executive Klaus Zumwinkel had a trust with the group. LGT paid a €50m (£44m) fine last December to settle the regulators’ tax probe, and did not admit guilt. Zumwinkel admitted tax evasion and received a suspended jail sentence.

In a statement, Deutsche Bank said it “regrets the fact that the transaction did not come about”.

BaFin spokesman Ben Fischer told City A.M.: “We have to check whether the buyer has reliable funds and the sources of the money that it was investing were solid.”