WASHINGTON-- Deutsche Bank AG is close to resolving a
long-running investigation into the manipulation of interest rates,
but demands from New York's financial regulator--who hasn't
previously been involved in related settlements--are pushing the
penalty to new heights, according to people familiar with the
matter.
Germany's biggest bank is expected to pay more than $1.5
billion, and one of its British subsidiaries will plead guilty to
resolve the probe into whether its traders tried to manipulate the
London interbank offered rate, these people said.
The numbers are still in flux, but the bank is expected to reach
a final deal in the coming weeks, these people said.
Other global financial institutions, including Barclays PLC, UBS
AG and Royal Bank of Scotland agreed in 2012 and 2013 to pay more
than $3.5 billion to settle similar rate-rigging charges from
authorities around the world including the U.S. Justice Department,
the U.S. Commodity Futures Trading Commission, and the U.K.
Financial Conduct Authority.
New York's Department of Financial Services, created in 2011,
hadn't been involved in the earlier investigations. The agency
doesn't have authority over all of the institutions under
investigation, only those with New York state charters, like
Deutsche Bank.
The state agency, which has quickly developed a hard-charging
reputation through demanding large penalties and threatening to
revoke licenses, has since become involved in the Deutsche Bank
investigation. The regulator, headed by Benjamin Lawsky, is
demanding its own large penalty from Deutsche Bank, complicating
efforts to reach a final number, the people said. The size of that
request couldn't be determined.
The other authorities are struggling to determine whether they
can force the bank to pay a larger total set of penalties than
other banks did, relative to the conduct. The other option
authorities have is to give credit to the bank for any penalty it
pays to New York, but such credit could be considered unfair to the
banks that previously settled and faced harsher penalties from the
other authorities.
"This is really a novel issue for the government agencies," one
person familiar with the discussions said.
Deutsche Bank said in a statement, "We continue to work with the
authorities that are reviewing interbank offered rates
matters."
The timing of the settlement was earlier reported by the New
York Times.
The New York regulator has proved to be a thorn in the side of
many of the banks it regulates, and of other regulators.
In November Barclays was nearing an agreement to resolve
separate U.S. and British investigations into alleged
currency-rigging efforts but pulled out at the last minute because
of complications with New York.
Five other banks that month agreed to pay a total of $3.3
billion in penalties to the FCA and CFTC to resolve the currency
manipulation probes. U.S. investigations into that conduct are
continuing and are expected to be resolved in coming weeks.
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