A Deutsche Bank derivatives trader faces a disciplinary hearing today for allegedly overstating his profits by £30m. Anshul Rustagi, who is based in London, was told to stay away from the office last month pending the outcome of an internal inquiry after colleagues discovered the alleged embellishment of his performance.
He trades in bundles of bonds and other debt instruments known as collateralised debt obligations (CDOs). The controversial financial instruments - increasingly popular among investors chasing higher returns - were famously described as "toxic waste" by Sir Howard Davies, the former chairman of the Financial Services Authority.
Deutsche is one of the biggest players in the burgeoning CDO market. Mr Rustagi's alleged overstatement is small beer, but is the latest of several recent embarrassments for the German bank. The bank's chief executive, Josef Ackermann, has come under renewed fire after a German court ordered his retrial over windfall payments for bosses of Mannesmann after the company's takeover by the rival British mobile operator, Vodafone.
The investment bank is trying to discover how the alleged major discrepancy was built up and remained undiscovered over several months. Mr Rustagi is a relatively junior trader in his mid-20s. It is also unclear why Mr Rustagiinflated his trading profits, as is alleged, although City sources said Deutsche decides the size of its annual performance-related bonuses in December.
The alleged problem is thought to be an isolated one, with no Deutsche client losing out. The investigation is not criminal as no fraud was involved, but the FSA, the City regulator, has been informed.
Mr Rustagi may appeal against the decision of Deutsche's disciplinary committee. That process is likely to take several weeks. The bank declined to comment.