Deutsche Bank's London subsidiary fined (US$775m) for LIBOR manipulation

Deutsche Bank's London subsidiary fined (US$775m) for LIBOR manipulation

German banking giant Deutsche Bank and its UK subsidiary will pay another record fine, with US$775m the latest sum levied, for admitting that it rigged interest rates in a multi-bank conspiracy, that undermined global financial markets, the US Department of Justice said on Tuesday.

In a statement on its website the US Department of Justice said that Deutsche Bank’s London subsidiary DB Group Services, where most of those who admitted manipulating the rate worked, signed a plea agreement with the US government in which it admitted its criminal conduct and agreed to pay US$150m in fines.

In addition, Germany’s biggest bank, whose headquarters is pictured left, agreed to pay an additional US$625m criminal penalty for manipulating the London Interbank Offered Rates (LIBOR) for the US dollar and several other currencies. It also agreed to admit and accept responsibility for its misconduct, designed to boost its trading positions, and said that it will continue to cooperate in the Justice Department’s continuing investigation. US authorities also said that independent monitors would be installed on the matter for at least three years.

As per the US Justice Department’s report, Deutsche Bank engaged in the misconduct from at least 2003 through early 2011. However, in accepting responsibility and paying the fines, the deal allows the bank to keep its operating license in the United States. The bank’s New York branch has more than 1,700 employees and total assets exceeding US$152 billion.


The US Justice Department statement said: “Numerous Deutsche Bank derivatives traders – whose compensation was directly connected to their success in trading financial products tied to LIBOR – engaged in efforts, many times in conjunction with other banks, to move these benchmark rates in a direction favorable to their trading positions.

“Specifically, the derivatives traders requested that LIBOR submitters at Deutsche Bank and other banks submit contributions favorable to trading positions, rather than the accurate rates that complied with the definition of LIBOR.  Through these schemes, Deutsche Bank defrauded counterparties who were unaware of the manipulation.”

Record US$7.2bn fine

The fine is the latest in a long line of fines, for the troubled German bank. In January, the US Justice Department, along with federal partners, announced a record US$7.2bn settlement with Deutsche Bank resolving federal civil claims that Deutsche Bank misled investors in the packaging, securitization, marketing, sale and issuance of residential mortgage-backed securities (RMBS) between 2006 and 2007.

The latest penalty takes the total fines imposed on the German lender to approximately US$8.63bn. In addition to the record US$7.2bn fine and yesterday’s fines, Deutsche Bank has also paid US$800m to the US Commodity Futures Trading Commission and a UK record £163,076,224 (about US$204m) by the UK regulator the Financial Conduct Authority.

It also agreed to settle with New York’s Department of Financial Services (about US$630 in total), as reported, for failing to maintain an adequate anti-money laundering controls linked to a series of Russian ‘mirror’ trades.

Asia desk closure

Earlier this week Deutsche Bank Wealth Management announced that it has shut the desk servicing external asset managers in Asia.  It will now be offering the EAM service through relationship managers in the region. And last year, as reported, the firm also closed its private banking operation in Australia and, as reported, it sold its stake in UK in financial company Abbey Life to Phoenix.

Deutsche Bank also announced recently, as reported, that it was going to the markets to ask investors for €8bn (US$8.5bn) to help improve its financial health as it has announced that it is to break up its business, including listing its asset management arm for sale, as it bids plans to secure its financial future.

Deutsche Bank said it will seek to raise about €8bn (US$8.5bn) –its fourth capital hike since 2010. The four add up to a total of about €30bn (US$32bn), which more than the bank’s current market value, according to current valuations.

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Gary Robinson

Commercial Director, Head of Video at International Investment.