Deutsche Bank AG (NYSE: DB) is suffering from a "systemic breakdown" that "expose the firm to significant operational risk and misstated regulatory reports," according to a letter from the New York Federal Reserve reported Tuesday.

The bank's shares closed Tuesday at $34.80, down 2.93 percent.

The bank's publicly filed financial statements include, "material errors and poor data integrity" and restatements may be required," according to the December letter, as reported by The Wall Street Journal.

In a statement to the newspaper, the bank said it "has been working diligently" to strengthen its systems and controls. The bank said it is spending $1.7 billion globally and appointing 1,300 people, including about 500 compliance, risk and technology employees in the United States.

The New York Fed's criticisms pertained only to the German bank's U.S. operations.

The New York Fed voiced similar concerns to the bank in 2002, 2007 and 2012, according to the report.

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