German regulators were briefed about Deutsche Bank’s valuation of a clutch of complex derivatives now under investigation by the US Securities and Exchange Commission (SEC).

People familiar with the valuation process said BaFin, the German banks supervisor that is Deutsche’s principal regulator, routinely sat in on audit committee meetings during the 2008-9 period, when the bank failed to recognise up to $12 billion of paper losses, according to allegations made to the SEC by three former bank employees.

The Financial Times reported yesterday that, according to three separate complainants, Deutsche failed to mark down the deteriorating value of so-called leveraged super-senior trades. If the assets – worth a notional $130 billion – had been properly accounted for, Deutsche could have required a government bailout.

Senior management and several members of the supervisory board were also aware of the valuations, which one person involved said had been lowered by a “few hundred million euros” after consultation with the bank’s auditors KPMG. – Copyright The Financial Times Limited 2012