Deutsche Bank will pay $2.5 billion to regulators in the U.S. and U.K. to settle charges that it manipulated benchmark interest rates from 2005 to 2009, authorities announced Thursday morning.
U.S. regulators said that the bank, which is headquartered in Frankfurt, Germany, coordinated within its organization and with other banks to change the interest rates used throughout the world in setting the terms of loans, including retail products like student loans and mortgages.
In addition to the $2.5 billion fine, the largest related to the years-long investigation into possible rate-rigging, regulators ordered Deutsche Bank to fire seven employees and bar others from work related to the scandal.
“Deutsche Bank employees engaged in a widespread effort to manipulate benchmark interest rates for financial gain,” said Benjamin Lawsky, the head of New York’s Department of Financial Services. “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.”
The $2.5 billion in settlements includes $600 million to the Department of Financial Services, $800 million to the Commodity Futures Trading Commission, $775 million to the Department of Justice, and the equivalent of roughly $340 billion to the U.K. Financial Conduct Authority.
The Department of Financial Services released messages sent by Deutsche Bank traders requesting changes to submissions that set benchmark interest rates, including the widely-used London Interbank Offered Rate, or LIBOR, a reference rate of the interest charged by banks to each other on very short-term loans.
In one instance in 2006 involving a different rate, a London Deutsche Bank trader wrote a banker at Barclays asking the banker to help manipulate the rate, saying: “I’m begging u, don’t forget me… pleassssssssssssssseeeeeeeeee… I’m on my knees…”
In 2009, a vice president appeared to acknowledge the bank’s involvement in rigging rates, saying of a different reference rate that “Tibor is a corrupt fixing and DB is part of it!”
CFTC director of enforcement Aitan Goelman said in a statement that “Deutsche Bank’s culture allowed such egregious and pervasive misconduct to thrive.”
“We will be relentless in continuing to investigate and bring benchmark manipulation cases until such time as those involved in setting these benchmarks get the message that manipulation will not be tolerated, and the public can be confident in the integrity of these benchmarks,” Goelman said.
Over the past several years, U.S. regulators have pursued investigations related to rigging in interest rate and exchange rate markets. The CFTC has settled cases with UBS, the Royal Bank of Scotland, Citibank, and JPMorgan Chase, among others.
