Deutsche Bank is apparently in hot water with U.S. bank regulators once again. According to documents reviewed by The Wall Street Journal, the Federal Reserve Bank of New York has determined that Deutsche Bank AG (NYSE:DB) (ETR:DBK)’s American operations suffer from a variety of serious financial-reporting problems that the firm has known about for years but made little effort to correct.

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DB’s U.S. operations account for about one-quarter of the firm’s total assets.

Letter from Fed

Daniel Muccia, the New York Fed senior vice president overseeing Deutsche Bank AG (NYSE:DB) (ETR:DBK), wrote a letter to the bank saying that many reports produced by the bank’s U.S. divisions “are of low quality, inaccurate and unreliable. The size and breadth of errors strongly suggest that the firm’s entire U.S. regulatory reporting structure requires wide-ranging remedial action.”

The letter ordered Deutsche Bank execs to take steps were to fix the problems. The letter also mentioned the firm might have to restate some of its financial reports.

The letter, dated December 11, 2013 and reviewed by the WSJ, said Deutsche Bank AG (NYSE:DB) (ETR:DBK) had made “no progress” in correcting already identified problems. Muccia also wrote that examiners found “material errors and poor data integrity” in DB’s U.S. entities’ public filings, which are used by regulators and investors to evaluate ongoing operations. The problems identified included data-entry errors and not accounting for or accurately assessing the value of collateral when assessing the riskiness of loans.

Muccia wrote that the problems all add up to a “systemic breakdown” and “expose the firm to significant operational risk and misstated regulatory reports.”

Role of the Fed

The New York Federal Reserve Bank has a number of remedies it can apply to the banks it regulates. the Fed can send private letters demanding action, as in this case, or even impose restrictions on banks’ activities if deemed necessary.

Statement from Deutsche Bank

“We have been working diligently to further strengthen our systems and controls and are committed to being best in class,” a Deutsche Bank AG (NYSE:DB) (ETR:DBK) spokesman said Tuesday in regard to the letter from the Fed. As part of these efforts, he continued, the bank is spending €1 billion ($1.35 billion) globally and employs 1,300 people, including about 500 compliance, risk and technology employees in the U.S. alone.