Daily Management Review

Deutsche Bank slapped with record fine for interest manipulation


04/24/2015




Deutsche Bank has been fined a record $2.5bn (£1.7bn) by UK and US financial regulators for manipulating interest rates.

The German bank company has also been under fire for not giving way to investigating regulators and was ordered to give the pink slip to seven of its employees. The fine could be one of the biggest to hit any major multi-national bank in the recent times and shows a bleak picture of the overall banking market.

The investigators have also revealed a slew of mails and chats which expose the bank’s involvement in changing interest rates to price £3.5 trillion of financial transactions. Georgina Philippou, the acting director of enforcement and market oversight at the Financial Conduct Authority said, ““This case stands out for the seriousness and duration of the breaches by Deutsche Bank – something reflected in the size of today’s fine. 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,” she said to The Guardian. According to the regulator, the company repeatedly misled the investigation and took far more time to produce vital documents.

The German bank meanwhile had emphasized that it would still remain profitable in the first quarter before a major restructuring that could involve the bank pulling back from the high street. Though in total 29 Deutsche employees were involved, the bank was unable to say how many staff had been sacked or disciplined as a result. The New York State’s Department of Financial Service has but ordered to sack seven employees, who are all based in London and one Frankfurt-based vice-president. In the New York department’s investigation it was revealed that the bank employees had coordinated their submission to the range of interest-range benchmarks called as Euribor while collaborating with other banks in the high street.

The investigators in this episode of banking manipulation includes the US Commodity Futures Trading Commission as well as US Department of Justice. Though the bank had admitted to its part in the rigging, even in 2012 when the concerns surfaced, the complete investigation was officially closed this week.
The rigging of the interest rates occurred through Libor which is a panel of banks sending submissions about the price they expected to be charged to borrow from rival banks across a range of currencies and time scales. This process has been changed since the scandal erupted in 2012.

Deutsche bank also noted that no current or former member of the management board was found to have been involved in or aware of the trader misconduct. Anshu Jain, the co-chief executive, who used to run the investment bank, released a statement with his co-chief Jürgen Fitschen: “We deeply regret this matter but are pleased to have resolved it. The bank accepts the findings of the regulators. 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.
 
 
 
 






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