US and UK watchdogs impose heavy penalty
Deutsche Bank told to sack staff after £1.7bn fine for libor fix
British and US authorities fined Deutsche Bank £1.67 billion in one of the biggest corporate penalties ever handed out.
Germany’s largest lender was found guilty of obstructing regulators who ordered to fire seven employees in the eighth global settlement of alleged benchmark interest rate rigging.
Following a seven-year investigation the world’s biggest institutions have now paid out a collective $8.5 billion (£5.6bn) in fines and 21 employees face criminal charges.
The regulators, so often accused of buck passing and failing to take appropriate measures, pulled no punches, laying the blame on senior staff for misleading them, failing to be open and cooperative, and prolonging the investigation.
The US fine on Deutsche Bank was $2.12 billion while the UK imposed a $340 million penalty in relation to staff fixing the London Interbank Offered Rate (Libor), a key instrument used in lending.
The UK’s Financial Conduct Authority (FCA) found at least 29 Deutsche Bank employees were part of the practice which took place mainly in London but also in Frankfurt, Tokyo and New York.
Emails and message chats were released today by New York State Financial Services Superintendent Benjamin Lawsky and Britain’s Financial Conduct Authority. They show Deutsche Bank traders requesting that the people responsible for submitting rates, called submitters, do it in a way that would benefit their trading positions, officials said.
In February 2005, a trader wrote to another trader who was also occasionally a submitter, “can we have a high six month libor today pls gezzer?”
The rate submitter replied, “sure dude, where wld you like it mate ?”
After they agreed on a rate, the trader who asked for the rate fix commented that he couldn’t get “that level of flexibility” when the usual submitter was around.
Just before New Year’s Eve in 2006, a submitter told a trader he would try to help him with his rate request as “a belated Christmas present.”
Deutsche Bank’s traders made similar requests to employees of other banks and financial institutions, Lawsky and FCA said.
One exchange from September 2006, for example, shows a London desk head at Deutsche Bank literally begging for a low EURIBOR rate submission from a banker at Barclays.
EURIBOR is the interbank offered rate pegged to the euro.
He said: “I’m begging u, don’t forget me… pleassssssssseeeeeeee… I’m on my knees…”
Bank staff also bragged about the power of Deutsche Bank’s Frankfurt and London offices. In an email to the head of Deutsche Bank’s Global Finance Unit, one wrote: “Have you u seen the 3mk fixing today? That was an excellent concerted action FFT/LDN. Cheers.”
“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, the FCA’s acting director of enforcement and market oversight.
The bank’s joint chief executives Juergen Fitschen and Anshu Jain said in a statement that no current or former management board member had been found to have been involved in or aware of the misconduct. “We deeply regret this matter but are pleased to have resolved it.”
The previous $1.5 billion record fine was imposed on Switzerland’s UBS in 2012. Barclays was first to be fined a then-record $450 million over rate rigging and for deliberately understating rates during the 2007/08 credit crunch.
Since then, a handful of top executives have lost their jobs over the scandal. Barclays’ chief executive Bob Diamond was followed by John Hourican, former head of Royal Bank of Scotland’s investment bank. Eight months later, Rabobank’s head Piet Moerland quit after the Dutch bank was fined $1 billion.