Deutsche Bank alleged to have hid losses in 2007-09. Good?

The effects of what's being alleged are far from simple.

The German central bank has opened an investigation into whether Deutsche Bank failed to correctly mark credit derivatives to market during the financial crisis. The allegations, which the FT reports were made independently by three whistleblowers from inside the bank, suggest that the bank did so to avoid officially recording losses which may have prompted a government bailout.

The proper reaction to the case is more complex than it might first appear, because this is one of the first allegations of massive misevaluation which deals, not with the the run up to the financial crisis, but the response to it. And it is massive: the derivatives position under investigation was worth $130bn.

But interestingly enough, if mispricing did occur, it may have been for the best. Marking to market is the practice of repricing your portfolio, not according to what you paid for it, but what it's worth at current market prices. So the allegation is that Deutsche Bank had a $130bn position, which had dropped to – let's say – $60bn on the open market; but were apparently recording it as worth $72bn in their books, so as to avoid looking insolvent.

In normal times, that would be pretty clearly a negative. But the days after the collapse of Lehman Brothers were anything but normal. To say markets were panicky is an understatement, and so it's pretty likely that the reaction if Deutsche Bank had revealed those losses would have been terminal. As it was, the bank muddled through, and came out the other side more-or-less intact.

Now, that doesn't mean that if there was wrongdoing it should be ignored. After all, if Deutsche Bank hid losses and collapsed despite that, then the hit that creditors would have taken would have been even bigger. But if, as seems to be the case, DB was considered a healthy bank based on what was reported, and would have been considered unhealthy if it had reported those larger losses, then the world might be better off for it. After all, the last thing the winter of 2008 needed was another bust bank.

It's worth noting as well that these allegations aren't new. As DB says, they are “more than two and a half years old” and have already been investigated by an external law firm which found them “wholly unfounded”. But just be wary of chalking this one up in the "bad behaviour from banks hurts us all" column; the real affects of what's alleged are far from simple.

Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Could Labour lose the Oldham by-election?

Sources warn defeat is not unthinkable but the party's ground campaign believe they will hold on. 

As shadow cabinet members argue in public over Labour's position on Syria and John McDonnell defends his Mao moment, it has been easy to forget that the party next week faces its first election test since Jeremy Corbyn became leader. On paper, Oldham West and Royton should be a straightforward win. Michael Meacher, whose death last month triggered the by-election, held the seat with a majority of 14,738 just seven months ago. The party opted for an early pre-Christmas poll, giving second-placed Ukip less time to gain momentum, and selected the respected Oldham council leader Jim McMahon as its candidate. 

But in recent weeks Labour sources have become ever more anxious. Shadow cabinet members returning from campaigning report that Corbyn has gone down "very badly" with voters, with his original comments on shoot-to-kill particularly toxic. Most MPs expect the party's majority to lie within the 1,000-2,000 range. But one insider told me that the party's majority would likely fall into the hundreds ("I'd be thrilled with 2,000") and warned that defeat was far from unthinkable. The fear is that low turnout and defections to Ukip could allow the Farageists to sneak a win. MPs are further troubled by the likelihood that the contest will take place on the same day as the Syria vote (Thursday), which will badly divide Labour. 

The party's ground campaign, however, "aren't in panic mode", I'm told, with data showing them on course to hold the seat with a sharply reduced majority. As Tim noted in his recent report from the seat, unlike Heywood and Middleton, where Ukip finished just 617 votes behind Labour in a 2014 by-election, Oldham has a significant Asian population (accounting for 26.5 per cent of the total), which is largely hostile to Ukip and likely to remain loyal to Labour. 

Expectations are now so low that a win alone will be celebrated. But expect Corbyn's opponents to point out that working class Ukip voters were among the groups the Labour leader was supposed to attract. They are likely to credit McMahon with the victory and argue that the party held the seat in spite of Corbyn, rather than because of him. Ukip have sought to turn the contest into a referendum on the Labour leader's patriotism but McMahon replied: "My grandfather served in the army, my father and my partner’s fathers were in the Territorial Army. I raised money to restore my local cenotaph. On 18 December I will be going with pride to London to collect my OBE from the Queen and bring it back to Oldham as a local boy done good. If they want to pick a fight on patriotism, bring it on."  "If we had any other candidate we'd have been in enormous trouble," one shadow minister concluded. 

Of Corbyn, who cancelled a visit to the seat today, one source said: "I don't think Jeremy himself spends any time thinking about it, he doesn't think that electoral outcomes at this stage touch him somehow."  

George Eaton is political editor of the New Statesman.