Embattled German lender Deutsche Bank lost $1.6 billion on a single bond trade that involved insurance from Warren Buffett’s Berkshire Hathaway, according to the Wall Street Journal.
The bank bought a $7.8 billion portfolio of municipal bonds in 2007, according to the report. Deutsche Bank bought default protection on the bonds from Berkshire the following year, paying $140 million in the transaction.
In the decade after its purchase, Deutsche Bank managers delayed the recognition of losses on the trade, sparking an internal debate among executives and the bank’s auditor, the newspaper reported. The trade had become an albatross for the firm, which ultimately chose to sell the bonds at a loss and retire its Berkshire insurance, recognizing the $1.6 billion loss in 2016.
WSJ story here.