Deutsche Bank Manipulated LIBOR and Other Global Interest-Rate Benchmarks

Summary

Deutsche Bank reached approximately $2.5 billion in coordinated settlements with U.S. and UK authorities in 2015 after regulators found that traders and benchmark submitters manipulated globally important interest-rate benchmarks, including LIBOR and EURIBOR, to benefit Deutsche Bank's trading positions. LIBOR and EURIBOR were among the world's most important financial benchmarks. They were used to determine interest rates on enormous volumes of financial products, including derivatives, corporate financing and other loans. Manipulating these benchmarks therefore had implications far beyond individual trades inside Deutsche Bank. According to the U.S. Department of Justice, Deutsche Bank derivatives traders requested that employees responsible for submitting benchmark rates alter their submissions in directions that would benefit the traders' financial positions. Submitters sometimes accommodated those requests rather than making submissions based solely on legitimate market information. U.S. Department of Justice – Deutsche Bank LIBOR manipulation resolution: https://www.justice.gov/archives/opa/pr/deutsche-bank-subsidiary-sentenced-manipulating-libor Deutsche Bank's London subsidiary, DB Group Services (UK) Limited, pleaded guilty to wire fraud for its role in manipulating LIBOR. The subsidiary admitted that employees engaged in a scheme to manipulate benchmark submissions in order to benefit Deutsche Bank's derivatives trading positions. The DOJ resolution included a $625 million criminal penalty: a $150 million penalty under Deutsche Bank AG's deferred prosecution agreement and a $475 million criminal fine imposed on DB Group Services (UK) Limited. U.S. DOJ – Deutsche Bank benchmark-manipulation case: https://www.justice.gov/archives/opa/pr/deutsche-bank-subsidiary-sentenced-manipulating-libor The U.S. Commodity Futures Trading Commission separately found that Deutsche Bank routinely engaged in acts designed to manipulate LIBOR, EURIBOR and other benchmark rates. According to the CFTC, Deutsche Bank traders asked benchmark submitters to make submissions favorable to their trading positions, and submitters sometimes agreed. The regulator found that the misconduct involved multiple traders, offices and currencies and continued for years. The CFTC imposed an $800 million civil monetary penalty on Deutsche Bank, which at the time was the largest penalty the CFTC had imposed in a benchmark-manipulation case. U.S. Commodity Futures Trading Commission – $800 million Deutsche Bank penalty: https://www.cftc.gov/PressRoom/PressReleases/7159-15 New York's Department of Financial Services also investigated Deutsche Bank and found widespread manipulation involving employees in London, Frankfurt, New York and Tokyo. The New York regulator described communications in which traders openly requested favorable submissions from colleagues. The conduct involved several benchmark rates and currencies and occurred over an extended period. New York DFS imposed a $600 million penalty on Deutsche Bank and required the bank to terminate seven employees involved in the misconduct who remained employed at the time of the settlement. New York Department of Financial Services – Deutsche Bank benchmark manipulation enforcement action: https://www.dfs.ny.gov/reports_and_publications/press_releases/pr1504231 The UK's Financial Conduct Authority reached similar conclusions. The FCA found that Deutsche Bank employees manipulated both LIBOR and EURIBOR submissions and that misconduct occurred across several business divisions and locations. The FCA also found serious deficiencies in Deutsche Bank's systems and controls and criticized the bank's handling of the regulatory investigation. The FCA imposed a £226.8 million penalty, which at the time was the largest fine the FCA had ever imposed. UK Financial Conduct Authority – Deutsche Bank £226.8 million LIBOR/EURIBOR penalty: https://www.fca.org.uk/news/press-releases/deutsche-bank-fined-%C2%A32268-million-libor-and-euribor-failings The FCA's findings were particularly damaging because the regulator concluded that Deutsche Bank had failed to deal with it in an open and cooperative manner during the investigation. The FCA said Deutsche Bank had provided a false attestation concerning the adequacy of its systems and controls and had misleadingly claimed that a report commissioned by the German regulator BaFin contained no material findings relating to Deutsche Bank when that was not the case. The coordinated enforcement actions resulted in approximately $2.5 billion in financial penalties, making the Deutsche Bank settlement one of the largest enforcement resolutions arising from the global benchmark-manipulation scandal. Company response: Deutsche Bank accepted the settlements and acknowledged serious failures. Then co-CEOs Jürgen Fitschen and Anshu Jain said the bank deeply regretted the matter and that the employees responsible had brought discredit to Deutsche Bank. The bank said it had disciplined or dismissed individuals involved and substantially strengthened its controls, surveillance and compliance systems. Deutsche Bank – Company information: https://www.db.com/ Key facts: Deutsche Bank traders and benchmark submitters manipulated LIBOR and EURIBOR to benefit the bank's trading positions; misconduct involved employees operating across major financial centres including London, Frankfurt, New York and Tokyo; Deutsche Bank's UK subsidiary pleaded guilty to wire fraud; the DOJ resolution involved $625 million in criminal penalties; the CFTC imposed an $800 million penalty; New York DFS imposed $600 million; the UK FCA imposed £226.8 million; and the coordinated settlements amounted to approximately $2.5 billion. The case is particularly serious because LIBOR and EURIBOR were not internal Deutsche Bank prices. They were global financial benchmarks relied upon throughout the financial system. Deutsche Bank employees manipulated submissions intended to represent objective market borrowing conditions in order to benefit their own trading positions. The misconduct persisted across multiple offices, currencies and years, and one Deutsche Bank subsidiary ultimately pleaded guilty to criminal wire fraud.