Deutsche Bank to Pay $2.5B for Interest-Rate Violations

Deutsche Bank has agreed to pay $2.5 billion in a settlement with U.S. and British authorities over the manipulation of benchmark interest rates used globally for its own financial gain.

The U.S. Justice Department said Thursday that the subsidiary DB Group Services UK Limited has agreed to plead guilty to wire fraud.

Deutsche Bank has fired “numerous” employees who were involved and is installing an independent monitor at its New York branch, according to New York’s Department of Financial Services. The department said it wants at least seven others fired, including four London-based directors and a vice president, as well as two Deutsche Bank employees who were reinstated and will be barred from any activities with U.S. dollar operations.

“Deutsche Bank employees engaged in a widespread effort to manipulate benchmark interest rates for financial gain,” Department Superintendent Ben Lawsky said. “While a number of the employees involved in misconduct have already left the bank, those that remain are being terminated or banned from the New York banking system.”

The bank said Thursday that it has dismissed or disciplined employees involved and strengthened its controls. It said no current or former member of its management board was involved or aware of the trader misconduct.

Jürgen Fitschen and Anshu Jain, co-chief executives, said: “We deeply regret this matter but are pleased to have resolved it. The Bank accepts the findings of the regulators.”

The penalty includes $600 million to New York, $800 million to the Commodities Futures Trading Commission, $775 million to the U.S. Justice Department and about $340 million to Britain’s Financial Conduct Authority.

Violations from 2005 through 2009 included the London Interbank Offered Rate, or LIBOR, authorities said.

The Justice Department said the $775 million are criminal penalties, and Deutsche Bank has entered into an agreement to continue cooperating in the investigation and keep a corporate monitor for three years.

“For years, employees at Deutsche Bank illegally manipulated interest rates around the globe – including LIBORs for U.S. Dollar, Yen, Swiss Franc and Pound Sterling, as well as EURIBOR (Euro Interbank Offered Rate) – in the hopes of fraudulently moving the market to generate profits for their traders at the expense of the bank’s counterparties,” said Assistant U.S. Attorney General Leslie Caldwell. “Deutsche Bank is the sixth major financial institution that has admitted its misconduct in this wide-ranging criminal investigation, and today’s criminal resolution represents the largest penalty to date in the LIBOR investigation.”

Other settlements involved Barclays Bank, UBS AG, The Royal Bank of Scotland, Cooperatieve Centrale Raiffeisen-Boerenleenbank and Lloyds Banking Group, federal authorities said. They have also charged 12 individuals and said Thursday that three have pleaded guilty.

“This case stands out for the seriousness and duration of the breaches by Deutsche Bank – something reflected in the size of today’s fine,” said Georgina Philippou, acting director of enforcement and market oversight at Britain’s Financial Conduct Authority. The misconduct involved at least 29 Deutsche Bank employees, including managers, traders and submitters, primarily based in London but also in Frankfurt, Tokyo and New York, the authority said.

This article appeared in print in the April 24th, 2015 edition of Hamodia.