Deutsche Bank pays $2.5bn to settle Libor rigging claims in UK and US

LONDON (ShareCast) - Deutsche Bank (Xetra: 514000 - news) has agreed to pay $2.5bn to settle US interest rate-rigging claims from UK and US regulators, including the largest ever UK fine for rate manipulation. Germany's biggest bank will pay the combined penalty and has agreed to "terminate and ban" individual employees who engaged in manipulation of the benchmark interest rates, regulators said on Thursday.

Deutsche, which was expected to pay a fine of around $1.5bn, will pay £227m to the UK's Financial Conduct Authority (FCA), , $800m to the Commodities Futures Trading Commission and $775m to the US Department of Justice and $600m to the NYDFS.

The FCA said it had handed Deutsche its largest ever for manipulation of the London interbank offered rate (LIBOR) and its European equivalent, EURIBOR, because the bank repeatedly misled the regulator.

Between January 2005 and December 2010, DB trading desks were found to have manipulated its rate submissions across all major currencies.

"This case stands out for the seriousness and duration of the breaches by Deutsche Bank," said Georgina Philippou, acting FCA director of enforcement and market oversight.

She added: "One division at Deutsche Bank had a culture of generating profits without proper regard to the integrity of the market. This wasn't limited to a few individuals but, on certain desks, it appeared deeply ingrained." Benjamin Lawsky, the NYDFS superintendent, said the manipulation was widespread among the bank's employees.

"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. We must remember that markets do not just manipulate themselves: It takes deliberate wrongdoing by individuals." A statement from the NYDFS cited an example of where Deutsche communicated and coordinated with employees of other banks and financial institutions regarding their respective rate contributions in advance of an IBOR submission: On September 7, 2006, a London desk head attempted to obtain a low EURIBOR submission from an external banker at Barclays (LSE: BARC.L - news) , "I'm begging u, don't forget me... pleassssssssssssssseeeeeeeeee... I'm on my knees..." The external banker replied, "I told them 1 m up is that right?" The London desk head continued, "please pal, insist as much as you can... my treasury is taking it to the sky... we have to counter balance it... I'm beggin u... can u beg the [a panel bank] guy as well?" The external banker agreed, "ok, I'm telling him." Traders at the bank used a three pronged approach, the FCA said, in order to attempt to maximise the impact on EURIBOR. These were: · To influence Deutsche Bank's submitters to alter the Bank's EURIBOR submissions; · To collude with other banks that sat on the panel that submitted the rates on which EURIBOR is based and request that they alter their submissions; and · On occasion to offer or bid cash in the market to create the impression of a change in the supply of funding in order to influence other panel banks to alter their submissions.

The DB fine far eclipses those issued by the Uk regualtor for Libor misconduct in recent years, with a £59.5m penalty issued to Barclays in 2012 the first, followed by Swiss bank UBS (NYSEArca: FBGX - news) 's £160m fine, RBS (LSE: RBS.L - news) £87.5m, Rabobank £105m and £50m to Lloyds last year.