Deutsche Bank tops table of wrongdoers with $2.5bn Libor fines

Record penalty for interest-rate fixing imposed because of bank's obstruction

Deutsche’s Frankfurt HQ: the bank is to pay a record £1.7bn over rigging benchmark rates (PA)

The Libor scandal reared its ugly ahead again after Deutsche Bank set a new record for penalties over the affair by agreeing a $2.5bn (£1.7bn) settlement with multiple watchdogs including Britain’s Financial Conduct Authority.

The FCA’s share of the huge fine was £227m, also a UK record for Libor, which was imposed both for the activities of Deutsche traders and as the bank was found to have misled the regulator and impeded its investigations into the interest-rate fixing scandal.

The previous overall record for a Libor fine was $1.5bn imposed on UBS.

The FCA said the size of the penalty on Deutsche reflected “the seriousness and duration of the breaches committed by Deutsche” and because the bank had been involved in “repeatedly misleading us”.

Senior bankers were accused of “recklessness” by wrongly claiming that the German regulator BaFin had prevented it from sharing a crucial report with the FCA.

During the investigation, the bank also destroyed 482 tapes of telephone calls by mistake – and provided inaccurate information about whether other records existed.

The FCA said the Libor misconduct was not simply due to the activities of one desk but extended through a number of areas in Deutsche’s Global Markets unit in London, New York, Tokyo and Frankfurt.

Deutsche’s co-chief executives, Jürgen Fitschen and Anshu Jain, said they “deeply regret this matter but are pleased to have resolved it”.

But the FCA snapped back in its final notice saying: “The bank’s leadership has stated publicly it promotes a culture of integrity. However, due to concerns over cultural failings at Deutsche Bank, including the findings of this notice, the authority will continue to monitor the bank’s success in implementing cultural change via ongoing supervisory action.”

Even in the wake of a series of memorable, boastful and grotesque communications between traders, watchdogs still manage to produce one of the most eye-catching.

On 7 September 2006, a London desk head at Deutsche attempted to persuade a colleague at another bank to falsify its submissions.

“I’m begging u, don’t forget me… pleassssssssssssssseeeeeeeeee… I’m on my knees…,” they said. He later said: “Please pal, insist as much as you can… … I’m beggin u… can u beg [another banker] guy as well?”

The other banker agreed, saying: “Ok, I’m telling him.”

In one discussion in August 2010 cited by the FCA, one banker even noted: “We’re going to get in trouble if we keep moving it up and down.”

As part of the settlement the bank agreed to plead guilty to a criminal charge of wire fraud across the Atlantic, entering into the by now standard deferred prosecution agreement with the US Department of Justice. In addition to a financial penalty, the New York State Department of Financial Services announced that Deutsche Bank would also terminate individual employees who engaged in misconduct, and install a monitor for violations of New York law.

It is the first time that particular regulator has been involved in one of these mass settlements and it emerged that it had ordered the firing of one managing director, four directors and one vice-president, all based in London, together with a Frankfurt-based vice-president. In total, 29 Deutsche employees were said to be involved in the misconduct, most of whom were in London, but also in Frankfurt, Tokyo and New York.

Libor, and similar Euribor, interests rates were set by banks submitting what they expected to pay to borrow from other banks. They are used to price a huge range of financial contracts, which has included certain mortgages.

Deutsche could yet face an even bigger fine over the foreign exchange fixing scandal.

Paying the penalty: Biggest Libor fines

Deutsche $2.5bn

UBS $1.5bn

RBS $1.1bn

Rabo $1.0bn

SocGen $0.6bn