Deutsche Bank loses €94 million on CVA mismatch
Hedges worked as capital mitigant, but generated an accounting loss, bank says
Deutsche Bank lost €94 million in the first half of 2013 on credit default swap (CDS) positions that were being used to reduce Basel III capital requirements – the result of a disparity in the way regulators and accountants view the hedges, according to a spokesman for the bank. Traders at other institutions see the loss as proof the new capital rules – implemented in Europe via the fourth Capital Requirements Directive (CRD IV) – are encouraging banks to take more risk.
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