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Deutsche Bank says derivatives exposure fears overblown: paper

Published 10/09/2016, 08:58 AM
© Reuters. A Deutsche Bank logo adorns a wall at the company's headquarters in Frankfurt
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FRANKFURT (Reuters) - Deutsche Bank (DE:DBKGn) is continuing to cut back the size of its derivatives book, which is not as risky as investors may believe, Chief Risk Officer Stuart Lewis told German weekly paper Welt am Sonntag.

"The risks in our derivatives book are massively overestimated," Lewis told the paper. He said 46 trillion euros in derivatives exposure at Deutsche appeared large but reflected only the notional value of the contracts, while the bank's net exposure to derivatives was far lower, at around 41 billion euros.

"The 46 trillion euros figure sounds gigantic, but it is completely misleading. The real risk is far lower," Lewis said, adding that the level of risk on Deutsche Bank's books was in line with that seen at other investment banking peers.

"We are trying to make our business less complex and are paring back our derivatives book. Parts of it were transferred into a non-core unit some years ago."

New banking regulations imposed in the wake of the 2009 financial crisis discourage large bets on risky assets, and have forced Deutsche Bank to drastically cut back the scale of its derivatives exposure.

Derivatives are financial contracts that draw their value from the performance of an underlying asset, index or interest rate. They can be used to hedge risks.

© Reuters. A Deutsche Bank logo adorns a wall at the company's headquarters in Frankfurt

(The story was refiled to correct the figure in third paragraph to trillions instead of billions)

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