(Bloomberg) -- Deutsche Bank was ordered to pay a record $2.5 billion fine and fire seven employees to settle U.S. and U.K. investigations into its role in rigging Libor.
Deutsche Bank must terminate six London employees and one in Frankfurt who engaged in wrongful conduct, the New York Department of Financial Services said in a statement Thursday. While the DFS didn’t identify them by name, one is a managing director, four are directors and two vice presidents. A U.K. unit agreed to plead guilty to a wire-fraud charge as well.
“Deutsche Bank employees engaged in a widespread effort to manipulate benchmark interest rates for financial gain,” DFS Superintendent Benjamin Lawsky said in the statement. “We must remember that markets do not just manipulate themselves: It takes deliberate wrongdoing by individuals.”
The penalty is the biggest yet in the interest-rate rigging scandal and eclipses that paid by UBS Group AG. The settlement comes on top of the $7.6 billion (7.1 billion euros) Deutsche Bank has spent on litigation in the last three years. The firm still faces legal challenges including probes into foreign exchange, mortgage- and asset-backed securities dealings and alleged U.S. sanctions violations. Co-Chief Executive Officers Anshu Jain and Juergen Fitschen are in the midst of reviewing options for the bank to boost returns.
Deutsche Bank’s press office didn’t immediately respond to requests for comment. Shares fell as low as 1.5% and were down 0.2% at 31.37 euros as of 2:15 p.m. in Frankfurt trading.
The U.S. Commodity Futures Trading Commission fined the bank $800 million. The Justice Department levied a $775 million penalty and will install a monitor at the bank for three years to ensure compliance with the terms of the deferred prosecution agreement. Lawsky’s agency will receive $600 million.
In the U.K., the Financial Conduct Authority fined Deutsche Bank $341 million (227 million pounds).
This misconduct involved at least 29 Deutsche Bank individuals including managers, traders and submitters, primarily based in London but also in Frankfurt, Tokyo and New York, the FCA said.
In an effort to manipulate libor, Deutsche Bank traders coordinated their Libor submissions with dealers at other firms, including at Barclays, BNP Paribas, Citigroup, Merrill Lynch, Societe Generale and UBS, according the the settlements.
“Deutsche Bank’s failings were compounded by them repeatedly misleading us,” Georgina Philippou, the FCA’s acting director of enforcement and market oversight, said. “The bank took far too long to produce vital documents and it moved far too slowly to fix relevant systems and controls.”
Deutsche Bank is one of the last to reach a settlement with U.K. and U.S. authorities in the London interbank offered rate probes, though it has already paid 725 million euros to settle a European Union antitrust investigation.
Thursday’s settlement brings the total global fines for the scandal to about $9 billion, paid by a dozen firms. UBS paid $1.5 billion in 2012.
Deutsche Bank was once one among more than a dozen banks surveyed daily by the British Bankers’ Association on their borrowing costs. The BBA would use their responses to calculate the London interbank offered rate, a benchmark used in more than an estimated $300 trillion of securities, from interest-rate swaps to mortgages and student loans. During the crisis, as it became harder to access credit, banks began to understate their borrowing costs to make themselves seem healthier.
Deutsche Bank said Wednesday it will log 1.5 billion euros in litigation costs in the first quarter, while it still expects to report a profit for the first quarter on near-record revenue. It set aside 3.2 billion euros in legal reserves at the end of December, the firm said in a presentation on Jan. 29. The bank doesn’t provide details on the reserves.
Bafin, Germany’s financial market regulator, has also been scrutinizing Deutsche Bank’s role in setting Libor, including what Co-Chief Executive Officer Anshu Jain knew about the behavior, people with knowledge of the situation have said. The agency has yet to complete its probe.
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