Commerzbank is conducting a review of its equity finance business, Global Investor/ISF understands.

It follows a recent decision by the lender to exit dividend arbitrage trades in Germany and elsewhere.

The deals involved large foreign investors lending out their holdings of German stocks, engineered by banks, so they were not on their books at dividend time.

German politicians said they were shocked to learn that Commerzbank, still part-owned by the state, was involved in the trades.

Commerzbank said this month that it would stop participating in the div-arb transactions without waiting for the government to ban them.

Securities finance professionals have argued that the practice, despite exploiting inefficiencies between tax rates, wasn’t illegal and ultimately benefitted end investors.

Commerzbank’s share price has dropped nearly 10% since news of its involvement and a weak earnings report.

Sources close to Global Investor/ISF say that an internal review is underway across the bank’s equity finance desks, primarily in Frankfurt and London.

No decisions have been made as of yet.