Deutsche Bank (DB +1.6%) lost $1.6B over almost a decade on a complex municipal bond investment that it made just before the 2008 financial crisis and resisted for years to reduce the value of bonds and related derivatives to what markets suggested they were worth, the Wall Street Journal reports.
"This transaction was unwound in 2016 as part of the closure of our Non-Core Operations" unit, a bank spokeswoman said in an email to the WSJ.
Deutsche Bank bought in 2007 about a $7.8B portfolio of 500 municipal bonds, which were insured by specialized monoline insurers to protect the bank against defaults by the issuers.
In March of 2008, the bank bought additional default protection from Berkshire Hathaway for $140M.
By the end of 2011, the bank had a little over $115M of reserves set aside to cover potential losses on the trade. That figure rose to over $1B at the start of 2016. By May the bank calculated an additional loss of $728M-$768M to sell the portfolio and unwind the loss protection from Berkshire.
Now read: Deutsche Bank Needs A New Strategy »
Subscribe for full text news in your inbox