In May 2015, Christian Sewing walked onto a floodlit stage with the rest of Deutsche’s top executives and board members. Tall and baby-faced, wearing stylish horn-rimmed glasses, he stood out among the row of mostly older men assembled at the front of Frankfurt’s vast Festhalle.
Sewing had joined Deutsche straight out of high school. Growing up in the German region of Westphalia, he’d been a star tennis player. His father insisted that he get some work experience before going to university, and in 1989 Sewing scored a coveted two-year apprenticeship in a local branch of Deutsche. Even though Sewing spent much of his time opening mail, there was something invigorating about working for this proud German institution. When the apprenticeship ended, Sewing stuck around, forgoing traditional higher education.
After six years in Germany, the bank cycled Sewing through Singapore and Toronto, and he started learning about the derivatives and investment-banking businesses that were becoming a crucial part of the company’s genetic makeup. Following further stints in London and Tokyo, he returned to Frankfurt after the Bankers Trust acquisition. He was alarmed at what he saw: a bank whose businesses were becoming lopsided, an institution that was losing its heritage in the pursuit of Wall Street. He voiced his concerns to Hugo Bänziger. “Let’s not make the mistake that we leave our roots,” he warned. Bänziger didn’t care what Sewing thought, and at the end of 2004, the thirty-four-year-old resigned in frustration.
Sewing spent the next couple of years at a smaller German bank. Initially he was relieved to be away from Deutsche, but that soon turned to boredom. Every time he opened a newspaper, he scanned the headlines looking for stories about Deutsche. “You are cheating, because your heart is not with the bank you work for,” Sewing’s wife told him. He knew she was right, and in April 2007, months before the onset of the financial crisis, he returned to Deutsche.
Now, eight years later, Sewing was a senior executive at arguably Europe’s most important company, bestowed for the first time with the honor of being onstage at the annual meeting. It was a warm, sunny day, and a dozen blue Deutsche flags flapped in the breeze outside the Festhalle. Investors filled up the floor seats, moved into the risers at the back, and then crowded into the balconies. As the meeting started, Anshu Jain, wearing a black suit and a textured blue tie, stood at a lectern emblazoned with the bank’s logo. His image was projected onto a giant screen, along with slides showing the bank’s recent financial metrics.
This was Jain’s third annual meeting as co-CEO. In 2013 and 2014, he had spent weeks memorizing his speeches in German, stammering through words that he didn’t understand, trying to impress his German regulators, customers, investors, colleagues. This time, he started off the same way. “Welcome on behalf of the board,” he began in German. “This is a very important day. Today we discuss, critically and constructively, where your bank stands. Every word is important on this day. That is why,” he continued, “I allow myself to continue in my mother tongue.” Journalists in the audience glanced at one another. Anshu started up again, now speaking in English, to groans from the audience. The bank muted Jain’s microphone and piped a German voice-over into the hall. Up on the dais, Sewing looked out at the audience and could see that Anshu’s English was going over about as well as the bank’s lead-weighted stock price. It was just as Sewing had warned the bank’s PR staff a few days earlier when they gave him a heads-up about Jain’s plan: The public would see it not as Jain’s lack of mastery of German; they would perceive it as his not caring about Germany.
Shareholders were angry—and with good reason. In the three years with Jain and Fitschen in charge, the company’s stock had sunk slightly; over the same period, the shares of Deutsche’s rivals had rocketed higher, in some cases doubling or tripling. Under the duo, the bank’s return on equity—the figure that Ackermann had demanded soar to 25 percent—hadn’t breached 3 percent. That was in no small part because Deutsche had recently been shelling out billions to resolve its long list of government investigations and other legal matters. And the problems showed no signs of letting up; by the bank’s tally, it still faced roughly 7,000 outstanding lawsuits and regulatory actions around the world.
Deutsche had refused to cut its losses and fundamentally alter its business model. Without exception, its European rivals that had harbored Wall Street ambitions had shelved those plans, a concession to a new era of tougher regulations and less tolerance for investment-banking adventures. Deutsche was alone in sticking to its guns—a reflection in part of the reality that for all its problems, the investment bank remained the company’s biggest profit producer. It also reflected Anshu’s biases. There was no way this creature of Wall Street would be the one to rethink the investment bank’s primacy within the overall organization. Nor was it even clear that jettisoning the investment bank would solve the underlying crisis of confidence; after all, most of Deutsche’s other businesses continued to flail.
Deutsche’s problems had been on vivid display in recent months, as had Jain’s inability to deal with them. Things had gotten off on the wrong foot in January, when he was back in the Swiss Alps for the World Economic Forum. In closed-door meetings with government officials including the U.S. Treasury secretary and the governor of the Bank of England, Jain lashed out, blaming overbearing regulators for causing recent market turbulence. His insolence—he was either ignoring or had forgotten the reasons for regulators’ newly hands-on approach to overseeing giant banks—drew sharp rebukes, especially because the bank was in serious trouble with regulators all over the world. That spring, Deutsche was penalized $55 million by the SEC for hiding up to $3.3 billion in losses on derivatives during the financial crisis—a judgment that was based in part on what Eric Ben-Artzi and other bank employees had complained about years earlier. Deutsche also disclosed for the first time that it was under investigation for the Russian mirror-trading money laundering.
Then, in late April, Deutsche had shelled out an astronomical $2.5 billion to U.S. and British authorities to settle the Libor investigation. (That was on top of $1 billion it had previously paid to European antitrust authorities for colluding to manipulate another important benchmark interest rate.) It was by far the largest penalty any bank had paid to resolve such a case. One reason was the enormous scale of the bank’s misconduct, which went far beyond Christian Bittar’s scheme; it seemed that more or less the entire bank had been involved or complicit. Another was that the bank dragged its feet on handing over evidence to the government—and that even after the bank had been ordered to preserve relevant materials, Deutsche had destroyed 482 tapes of recorded phone calls. A normally restrained British regulator went on the record with reporters to blast the bank for “repeatedly misleading us.” Miraculously, Alan Cloete, the executive responsible for the division where the misconduct occurred, remained in a senior leadership role at the bank.*
Shortly after the $2.5 billion penalty was announced, Jain held a conference call for hundreds of the bank’s senior managers. The call was to discuss Deutsche’s latest financial results, but given the harsh tone of the Libor judgments, participants expected him to at least acknowledge how badly the bank had screwed up. Some members of the supervisory board dialed in to hear how Jain would handle the delicate situation. Anshu’s solution was to ignore it: He gushed about the bank’s few areas of strength and didn’t mention the Libor case or Deutsche’s inescapable pattern of misconduct. The board members were appalled. This did not seem like a man up to the leadership challenge at hand.
Around this time, one exasperated board member confronted Anshu and the also-still-employed Colin Fan and scolded them for not accepting responsibility for the huge lapses that had taken place on their watch. Jain was indignant. He insisted that the board member didn’t understand how things worked at Deutsche; different members of the management board—the old vorstand—had distinct responsibilities for compliance and accounting and legal. So the failings weren’t his or Fan’s fault. “That’s how German governance works,” he lectured.
“Bullshit!” the board member shot back. “You’re the CEO of the entire company.”
The next month—a couple of weeks before Deutsche’s annual meeting—a top regulator at BaFin, given the unpleasant responsibility of supervising Deutsche, finally lost her cool. Frauke Menke, fifty-five years old, was a small woman with short blond hair and pale blue eyes. She had joined Germany’s financial regulator after receiving a law degree in 1995, initially specializing in money-laundering cases. She slowly ascended through the ranks of the agency that became BaFin. By 2012, she was in charge of overseeing Germany’s largest financial institutions. The cocksure men atop these leading banks had routinely made the mistake of underestimating this quiet woman. It was Menke who, three years earlier, had derailed Broeksmit’s promotion to be chief risk officer. Predictably, the German media obsessed over the notion that a woman was putting the kibosh on the careers of powerful men. One magazine, Cicero, called her “Das Phantom,” citing her mysterious clout, rare public appearances, and “pageboy” haircut.
For the past couple of years, Menke had been monitoring the agency’s investigation into Deutsche’s role in the Libor scandal and had been trying to assess the management team’s capacity to act responsibly. She had watched with mounting alarm as the bank repeatedly stiff-armed regulators, as Jain surrounded himself with what looked like yes-men, as it became clear that the rampant misconduct was not an accident but the inevitable consequence of the culture, incentives, and neglect emanating from the top of Deutsche.
On May 11, Menke sent a letter to the bank. The ostensible purpose was to convey the results of an outside review into the Libor case. But Menke’s real goal seemed to be to draw blood. The thirty-seven-page letter—written in German and promptly translated into English for broader distribution among the bank’s stunned executives and legal counselors—skewered Anshu and his team for creating a toxic culture, for allowing horrible behavior, for encouraging conflicts of interest, and for deceiving regulators. “If the measures required for proper management had been taken here in a timely manner or if the matter had at least subsequently been dealt with differently on the whole,” she wrote, “this could not only have saved immense costs for the bank, but the trustworthiness of the bank would not have been harmed in such a manner either.”
One by one, Menke went through the bank’s senior executives and explained how each had at best fallen down on his job. In one piercing attack, she described how the general counsel, Dick Walker, had seemed to take a minimalist approach to dealing with regulatory inquiries. “It appears to me that this is a manifestation of part of the culture that is possibly still characteristic to your bank, i.e. to prefer hiding, covering up, or entirely negating problems instead of addressing them openly and actively in order to prevent similar issues in the future.”
As for Jain, Menke rattled off a long list of lapses, including how he had fought to secure the huge cash payouts to Christian Bittar. “I consider the failures with which Mr. Jain is charged to be serious,” she summed up. “They display improper management and organization of the business.” Given the letter’s tone—it made the 2013 missive from Daniel Muccia at the New York Fed seem mild—the point was clear: The company’s most important regulator was calling for a transfusion of new blood.
Everywhere one looked, new crises seemed to be erupting, posing dire threats to Anshu’s grasp on power. In Germany, powerful labor unions were in a state of open revolt over the bank’s plans to eliminate thousands of jobs. A letter circulated among employees demanding Jain’s ouster, and some senior executives passed it around among themselves, agreeing with its proposed remedy. In Berlin, protesters—including more than a few right-wing extremists angry about an Indian running a German institution—marched with signs denouncing Anshu as a rat. Someone threw rocks with his name on them through the plate-glass window of a Deutsche branch.
Even among the people who should have been his biggest boosters, Jain was wearing out his welcome. When he held a town hall meeting in London for investment bankers, he told them he understood their frustrations about the bank’s flagging stock price and general malaise. Intended to improve morale, the pep talk irritated executives, who felt Jain was emoting without strategizing.
With Anshu’s muted face appearing on the Festhalle’s jumbotron on May 21, investors cast their votes for the bank’s board members. Such polls are usually a rubber stamp of a company’s incumbent leadership; executives and directors generally receive support in excess of 90 percent. But when the results came in at the end of Deutsche’s meeting, barely 60 percent had endorsed Jain and Fitschen—an extraordinary no-confidence vote in Deutsche’s CEOs. During the meeting’s question-and-answer session, two shareholders walked to microphones and called, literally, for Anshu’s head.
After the meeting, Jain and the bank’s senior executives met in private. Anshu was visibly upset. He asked colleagues to look up online how many times in German corporate history a CEO had received such paltry support. “I don’t want to stand in the way of the development of the bank, and if necessary, I will step aside,” he offered. No one took him up on that, but the supervisory board soon met to discuss the rebellion. It was clear to them that investors weren’t the only ones who had lost confidence. Employees and the board members themselves had, too. Even some major customers had been complaining that the uncertainty around the bank’s stability was leading them to consider taking their money elsewhere. That was a scary prospect: If customers started pulling their funds, it could quickly escalate into a run on the bank. It was time, the board decided, for Anshu to go.
Jain saw it coming. About a week after the annual meeting, he told Fitschen that his inability to speak German or to blend into German society was becoming a hindrance to the bank, and his colleague didn’t do much to dissuade him. Jain phoned Achleitner and told him he would prefer to resign than to wait for the bank’s board to ask him to leave. Unlike a year earlier, this time Achleitner didn’t try to talk Jain out of it. In fact, the chairman had already scouted out some German-speaking replacements.
A few days later, on a Sunday afternoon in Frankfurt, Achleitner summoned the supervisory board to an emergency meeting. Their normal practice was to gather in a boardroom high up in Tower A of the bank’s headquarters, but Achleitner was worried that reporters might notice the procession of armored limousines, so they instead convened at the nearby Jumeirah hotel. In a conference room whose floor-to-ceiling windows looked out upon an eighteenth-century palace, Achleitner told the directors why they were there: Jain had decided to leave, and Fitschen would step down the following spring. The board voted to accept their resignations. The chairman then explained that the only available replacement was one of their own: John Cryan, a longtime British financier who had served for a few years on Deutsche’s supervisory board. Without much debate, the directors anointed Cryan as the incoming CEO.
That afternoon, the news leaked, and Jain’s phone buzzed with hundreds of commiserating emails and text messages. “It’s a relief. You had no chance,” Rajeev Misra sympathized, noting that Anshu had been doomed from the start by his lack of German heritage. By the end of the week, Anshu would receive more than 2,000 such messages from colleagues and clients, many mourning what they figured was the end of the German bank’s investment-banking era—an era that had begun, exactly twenty years earlier, when Edson Mitchell had quit Merrill and arrived at Deutsche.
Jain emphasized to anyone who would listen that his departure was voluntary, that this was simply the right time to make way for new leadership. He tried to cheer himself up by having his personal assistant assemble all the condolence messages into a keepsake book. The night that his resignation was announced, he flew back to London and had a quiet evening at home with Geetika. She, for one, was relieved it was over.
John Cryan, a former chief financial officer at the Swiss bank UBS, had a freckled bald head and a creased hangdog face; colleagues had nicknamed him Mr. Grumpy. He was well regarded by investors, known for a methodical approach and a candid demeanor. (“He is the anti-Anshu,” a former colleague observed.) Investors celebrated Cryan’s ascent. Deutsche’s shares soared 8 percent the day after the change was announced. Hoping to act during a honeymoon period, Cryan announced that he was shutting down Deutsche’s investment-banking operations in Russia, which had been in the news because of its latest money-laundering troubles. He would also soon move to cleanse the bank of the remnants of Anshu’s Army: Michele Faissola, atop the wealth management business; Henry Ritchotte, the chief operating officer; and Colin Fan, in charge of the investment-banking division—all would be out or demoted.
Such housekeeping, though, was months in the future. On the morning of June 9, less than forty-eight hours after Cryan had been chosen as the incoming CEO, ten police cars, their sirens wailing, pulled up outside Deutsche’s headquarters. Thirty armed officers rushed inside, looking for information related to one of the many ongoing investigations into the bank. If there was any question about whether Anshu’s departure would easily resolve Deutsche’s smorgasbord of problems, the raid provided an emphatic answer: no.