A Berlin branch of the troubled German lender Deutsche Bank. Photo: iStock

American regulators have spent years trying to figure out how to deal with troubled Deutsche Bank AG, a challenge that was highlighted by a rather memorable trading day earlier this year.

Traders at the German bank’s American unit incurred a one-day
loss in the first quarter that was 12 times what internal risk
officers estimated it might lose on a typical day, according to a May filing. However, the lender’s US trading loss was reportedly offset by related gains in London.

The unrivalled loss in the US  was not deemed worthy of mention in the bank’s earnings report, but it raises questions about the ability of American regulators to create an accurate picture of a foreign bank’s operations if metrics such as value-at-risk show only a fraction of potential trading exposure.

After multiple failed stress tests and cease-and-desist orders, this
issue is particularly significant at Deutsche Bank, which has
increased capital levels at its American business.