The Libor fixing scandal is set to explode across the continent in the coming weeks as it emerged that German regulators have launched an intensive probe into Deutsche Bank – one of the City's biggest employers – over the affair.
BaFin, the country's financial watchdog, is said to have moved its existing investigation into the bank to the status of a "special investigation process" – indicating potential serious breaches. The results are expected by the middle of this month, Reuters reported, citing multiple sources.
While the UK's Financial Services Authority never names which London-based institutions it is investigating, news of the advanced BaFin probe could indicate a coordinated investigation. Deutsche is a big player in the City, to the extent that its new boss, Anshu Jain, was drawn from the London investment banking side of the business.
While it is not known what the outcome of the Deutsche investigation will be, Barclays will be relieved when other banks begin to be named, shamed and fined. Its decision to go first with a settlement backfired with the political and media storm of the past week and a half.
While it was known that Deutsche was among the many banks being investigated over rate fixing, so far it has only admitted it had received subpoenas and requests for information like all the banks submitting their rates to the Libor authorities.
Meanwhile, on the continent, the authorities which calculate the European version of Libor, known as Euribor, will be holding a conference call tomorrow in response to allegations about possible fraudulent manipulation of the rate by banks. Euribor-EBF is made up of the national banking associations of all the euro area countries.
Across the world, the scandal has led to outrage and calls for more transparency in the way Libor is arranged. This is despite the fact that, at the moment, banks are barely using the rate. The huge influx of lending from central banks, from the Bank of England and the Federal Reserve to the Bank of China, have flooded the markets with cash, making interbank lending fairly irrelevant.
Tony Crescenzi, at the giant investment group Pimco, told Bloomberg: "No one is bigger than the market. The enormity of the liquidity operations of the central banks has got so great that any attempt to manipulate an interest rate has got to be futile." But Mr Crescenzi joined the chorus of leading figures calling for Libor reform and transparency.
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