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Deutsche Bank is struggling with the fallout from the most ambitious and fraught IT integration in its history, including customers being locked out of their accounts.
The bank said in July that the migration of 12mn Postbank clients and 50bn individual data sets to a different IT system in July had unfolded without glitches but its German retail business has since been beset with problems.
Service centres have been overwhelmed by a jump in client inquiries and a number of critical internal workflows have stopped working. As a result, thousands of clients, many of them vulnerable people with few financial resources, have been locked out of their accounts, often for weeks.
Earlier this month, the disruption drew an unprecedented public rebuke from financial watchdog BaFin, which criticised Deutsche for “considerable disturbances in the handling of customer business” and reminded the country’s biggest bank that it was required to “comply with the relevant statutory deadlines for the protection of customers”.
BaFin’s reprimand led to a public apology and greater efforts to resolve the issues. It left the bank “shell-shocked”, according to a person familiar with the matter.
Fixing the issues has become a top priority for chief executive Christian Sewing, who ran the retail business between 2015 and 2018. After the BaFin criticism, he addressed staff in a town-hall meeting and receives twice-weekly progress briefings. A party to celebrate the completion of the project was called off even before BaFin’s intervention.
Deutsche has warned that it will take more than three months to fix the remaining problems and some senior managers are bracing for a formal BaFin sanction, possibly a fine. The watchdog said it might impose “supervisory measures if appropriate” and declined to comment further.
The woes are the latest to stem from Deutsche Bank’s ill-fated takeover of domestic rival Postbank in 2010, a troubled retail lender that was once part of Germany’s state-owned postal service. Over the past decade, Deutsche failed to find a buyer for Postbank and botched an earlier IT integration effort.
In 2017, Deutsche decided it would go ahead with a full integration of Postbank, keeping only the brand and its branches. This project, dubbed “Unity”, was completed in July when the final batch of clients and contracts was moved on to Deutsche’s IT systems.
While the bank insists that no data was lost or corrupted in the process, some internal workflows have all but collapsed since then.
One example is the handling of “garnishments” — the requirement for banks in Germany to deduct funds from a customer’s account if a creditor has secured a legal warrant. Deutsche is struggling to comply with a rule that a minimum amount must be left in an account after money has been deducted for garnishments.
In the meantime, thousands of clients have been cut off from their accounts, in some cases for weeks. That has left some households dependent on just one bank account facing difficulties in paying for food, rent and other bills.
“Fixing the garnishments issue is our top priority,” said a person familiar with the matter, adding that Deutsche has recently rolled out a tool that can help.
According to people familiar with the matter, Deutsche has more than 3,000 accounts that are affected by garnishments on a daily basis. The number of such accounts has jumped by a third in recent months as the German economy has slowed.
Verbraucherzentrale NRW, a consumer protection group, called the bank’s handling of garnishments “catastrophic”. The consumer group said that the picture has not meaningfully improved since BaFin’s intervention in early September and that complaints from Postbank clients continue to mount.
In its reprimand of Deutsche, BaFin said that the number of complaints was so high that it could not respond to them individually.
People familiar with the “Unity” project told the Financial Times that Deutsche had failed to give Postbank staff enough training on its own systems. In some cases, Deutsche replaced automated Postbank workflows with its own ones that require more manual intervention — leading to backlogs.
One area that has been disrupted is the ability of Postbank customers to draw down on mortgages taken out for construction projects.
The delay has left clients unable to cover construction bills, leading in some cases to work being halted. In one instance, a family that lost their home in the Ahr valley flooding two years ago had to move into a hotel because their rebuilding project stalled, according to a person familiar with the case.
Customer services have also been overwhelmed by inquires, resulting in long waiting times. On Trustpilot, an internet site where users can rate companies, Postbank is the lowest-ranked German bank with a score of 1.2 out of 5.
Deutsche insists that the disruption facing customers will not endanger its goal of cutting annual costs in retail banking by €300mn by 2025. People familiar with the matter said the bank has not yet seen a significant rise in account closures.
Disgruntled Postbank staff have aired their frustration internally, flooding Deutsche’s intranet with scathing comments, according to people familiar with the details. One remarked that while the top management had the ambition to operate a Michelin-star restaurant, its retail clients had to put up with “the quality of a chip shop”.
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