Michele Faissola. Picture: REUTERS
Michele Faissola. Picture: REUTERS

Frankfurt/New York — On his third anniversary as head of Deutsche Bank’s asset and wealth management unit, Michele Faissola held a town hall meeting at which staff were asked to wear black baseball caps embroidered with No 3. Even his new boss, then-CEO John Cryan, donned one.

It was September 2015, and the high-flying banker with an affinity for fast cars and complicated deals was at the pinnacle of power. Or so he thought.

A few weeks later the company announced he would leave, along with several senior executives who had thrived under the previous CEO, Anshu Jain. Cryan and Faissola clashed about strategy, but Germany’s largest lender was also under pressure from at least one European financial regulator to clean house, according to people with knowledge of the matter. Regulators were concerned at the time about a widening series of scandals at Deutsche Bank.

Fast forward to the present, and Faissola is facing five years in prison after his conviction and sentencing by an Italian court last month for helping Banca Monte dei Paschi di Siena hide losses with complex derivatives trades between 2008 and 2012.

Faissola, who declined to comment for this story, has denied wrongdoing. His lawyer in Italy has said he and other defendants are planning to appeal.

Deep scars

The scandals have left deep scars on Deutsche Bank, once the world’s largest financial institution by assets and foremost trader of fixed-income securities. They continue to cripple the company, which has paid almost $20bn in fines and legal costs and suffered grave damage to its reputation.

Faissola’s former colleagues — once referred to as “Anshu’s Army” — have moved on. The former co-head of investment banking, Colin Fan, now works for SoftBank; the other co-head, Robert Rankin, dabbles in fintech; Jain himself has settled in as president of Cantor Fitzgerald LP in New York.

Not so Faissola. The 51-year-old Italian banker continues to have influence at the Frankfurt-based lender through his job as an adviser to the Qatari royal family. Members have held a combined stake of at least 6% and as much as almost 10% in the bank for half a decade, jointly making them the largest shareholders and one of the most powerful outside voices. And they have a lot to be unhappy about: the bank’s share price has fallen more than 75% in that time.

Faissola still talks to executives close to the top of Deutsche Bank, according to two people with knowledge of the interactions. He knows the bank’s trading arm and its asset and wealth management operations inside out, and his advice has focused on those units. One senior official said he talked to Faissola after he left the bank about a potential merger with Credit Suisse, in which the Qataris also own a stake.

The Qataris were driving forces in Deutsche Bank’s decision to oust Cryan in 2018 and, more recently, have put pressure on chair Paul Achleitner to intensify the search for his successor, people familiar with both matters said.

They also pushed to name German lawyer Stefan Simon to the bank’s supervisory board in 2016. Simon, who advised several Deutsche Bank executives, including Faissola, during the investigation of the bank’s role in the manipulation of a benchmark interest rate known as Libor, became chief administrative officer this year. Faissola testified during the probe but was neither a target nor accused of any wrongdoing.

It is not clear if Faissola played a role in those personnel decisions or how much he speaks for the Qataris when he communicates with bank executives.

A Deutsche Bank spokesperson declined to comment, and the Qatari government communications office did not respond to questions on behalf of the royal family. More than a dozen people who know Faissola and agreed to be interviewed asked not to be identified so they could speak candidly.

The links between the former trader and the Qataris run deep. Faissola has been CEO of a family office called Dilmon since January 2018, according to his LinkedIn profile. The company belongs to Sheikh Hamad bin Khalifa Al Thani, a former emir of Qatar who owns a stake of at least 3% in Deutsche Bank through his Cayman Islands-based investment vehicle Supreme Universal Holdings.

A relative, former Qatari prime minister Sheikh Hamad bin Jassim Al Thani, known as HBJ, owns at least another 3% through a separate company called Paramount Services.

HBJ first bought Deutsche Bank shares in May 2014, paying €1.75bn at the time for a stake of 5.83% that’s now worth about €400m. He later split his holdings with the former emir, and both have since invested more money in the lender. Their joint holding was just under 10% as of July 2016, the bank has said.

Since July 2018 Faissola has served as a director of Heritage Oil, a Jersey-based exploration company acquired by a subsidiary of Al Mirqab Capital, an investment vehicle controlled by HBJ. A representative for HBJ declined to comment.

Faissola was also appointed that year to the supervisory board of French department-store chain Printemps, which was sold to Qatari-owned Divine Investments in 2013 by Deutsche Bank’s asset and wealth management division. Faissola, who was head of the unit at the time, was named a director of Divine in September.

In many ways, Faissola is the embodiment of the pre-crisis trading culture that underpinned Deutsche Bank’s rapid rise. Fresh out of college, he moved to London in 1991 and was hired four years later by the bank’s head of global markets, Edson Mitchell, the mastermind behind the German lender’s trading expansion.

Faissola soon became an influential voice on the rates desk, which specialises in securities tied to interest rates such as government bonds. One former top Deutsche Bank executive described him as a pioneer of interest-rate trading in Europe, praising his work in creating an overarching risk-management system.

But years of seemingly limitless growth for the bank’s trading operations came under strain in 2007 as the first signs of the financial crisis appeared. Like many banks around the world, Deutsche Bank began to pivot from selling derivatives to cutting the toxic assets from its balance sheet. Faissola’s focus shifted to reducing risks rather than taking them on. He was also brought in as a risk manager for the bank’s US mortgages portfolio in 2008 as it was spiralling out of control.

It was during that period that Deutsche Bank offered to help Monte Paschi. The Italian lender had suffered a crippling loss of more than €300m on a previous derivative structured by the German lender, and it was concerned that it might be put under administration should that loss show up in its annual report, Bloomberg News first reported.

Italian prosecutors alleged that Faissola’s desk designed a two-pronged trade for the Siena-based bank in 2008 whose sole purpose was to hide the losses. Faissola has rejected allegations of impropriety, saying the transactions were legitimate, approved by Deutsche Bank’s risk committee and not intended to disguise losses at Monte Paschi.

In 2012 Jain appointed Faissola to run the asset and wealth management division — a move that put him in charge of almost 12,000 people and a unit that accounted for more than 20% of Deutsche Bank’s total revenue. He remained a lieutenant in Anshu’s Army and continued to play a role in many of the controversies swirling around the bank.

He was among the first people to visit the London apartment of William Broeksmit after the former Deutsche Bank risk manager’s suicide in 2014. Faissola, a family friend, was invited to the dead executive’s home and provided support to family members after their loss, according to people with knowledge of the matter.

In 2015 Faissola explored the possibility of spinning off Deutsche Bank’s private-client business, with funding from a private equity firm, but he abandoned the plan in the face of internal opposition, one person said. The business was later sold to Raymond James Financial. After Jain resigned and was replaced by Cryan, Faissola proposed an IPO of the asset management division. Cryan disapproved, and Faissola left soon after.

Faissola told the court in Milan that he made £8m-£9m a year, mostly in bonuses, in the decade before he left the bank, making him one of Deutsche Bank’s highest-paid executives. He has homes in London and Sanremo, the northwest Italian city near where he was born, and owns several expensive cars.

Several people who worked for Faissola described him as keen to understand and improve the asset and wealth management division even though he had no background in either.

The unit grew during his tenure but still missed its targets. Pretax profit jumped to €1.3bn in 2015 from €940m four years earlier. Though the German stock market provided tailwind — the main index rose more than 40% over the same period — pretax profit in 2015 was €400m below the target set in 2012.

“Many senior members of Deutsche Bank expected that I would become, at the time of the appointment of Juergen Fitschen and Anshu Jain, CEO of investment banking. Instead they sent me to another division that was a less prestigious division at the time,” Faissola testified during the trial in Milan. “But I was very satisfied at the end.”

That could not have been his assessment about the trial that ended last month, when a judge sentenced him to 4.8 years behind bars for market manipulation and accounting fraud. Still, Faissola may not go to prison soon, if at all. His appeal could drag on for years.

Bloomberg