Deutsche Bank Hit With Record Fine Over Inter-Bank Rate Misconduct

Amisha Mehta Reporter London 24 April 2015

Deutsche Bank Hit With Record Fine Over Inter-Bank Rate Misconduct

Deutsche Bank has agreed to pay a $2.5 billion penalty for failings regarding LIBOR and EURIBOR inter-bank rates.

Deutsche Bank has received a record $2.5 billion fine from four different regulators in the UK and US for trying to manipulate interest rates.

The bank has been fined $2.17 billion by US regulators and £227 million ($340 million) by the UK's financial watchdog, the Financial Conduct Authority, over the manipulation of LIBOR and EURIBOR inter-bank rates. The FCA's penalty constitutes its largest yet for IBOR misconduct.

The misconduct involves at least 29 Deutsche Bank individuals, including managers, traders and submitters, mostly London-based but also in Frankfurt, Tokyo and New York, between 2005 and 2010. 

The manipulation of inter-bank rates that are used as the basis for mortgages, savings products and other financial instruments has played a part in further damaging trust in global financial services. Banks have boosted compliance teams with high-profile hires and spending on technology - whether all this activity will produce lasting positive outcomes remains to be seen.

“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 the FCA's acting director of enforcement and market oversight, Georgina Philippou, in a statement.

“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.”

The FCA added that the sheer size of its fine was because it had been repeatedly misled by Deutsche Bank. This involved the bank falsely informing the regulator that its LIBOR-related systems and controls were adequate in spite of the lack of such systems and controls in place.

The bank also provided inaccurate information to the regulator about whether other records existed.

“In one instance, Deutsche Bank in error destroyed 482 tapes of telephone calls, which fell within the scope of an FCA notice requiring their preservation,” the FCA added.

Deutsche bank's co-chief executives, Jürgen Fitschen and Anshu Jain, said in a statement yesterday that they “deeply regret” the matter.

“We have disciplined or dismissed individuals involved in the trader misconduct; have substantially strengthened our control teams, procedures and record-keeping; and are conducting a thorough review of the bank’s actions in addressing this matter,” they said.

In July last year, the FCA fined Lloyds Bank £50 million for LIBOR-related misconduct.

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