By Eyk Henning
FRANKFURT-- Deutsche Bank AG settled a long-running
investigation into the manipulation of interest rates with U.S. and
British authorities by paying a record $2.5 billion fine,
regulators said Thursday.
The giant German lender also agreed to plead guilty to U.S.
criminal charges and acknowledged that its internal monitoring
systems were insufficient to prevent the manipulation of the London
interbank offered rate, or Libor, a benchmark for interest rates on
trillions of dollars of financial contracts, according to
statements from regulators Thursday.
The settlement resolves investigations by U.S. federal and New
York state regulators and law-enforcement officials, as well as the
U.K.'s Financial Conduct Authority. The offices have been
investigating allegations that Deutsche Bank employees sought to
manipulate Libor.
The FCA said "Deutsche Bank's failings were compounded by them
repeatedly misleading us. The bank took far too long to produce
vital documents and it moved far too slowly to fix relevant systems
and controls."
The U.K. regulator also said the bank destroyed hundreds of
phone recordings.
The CFTC said Deutsche Bank's "culture allowed such egregious
and pervasive misconduct to thrive."
As part of the settlement, Deutsche Bank has agreed to install
an independent monitor and terminate and ban individual employees
who engaged in misconduct, the New York Department of Financial
Services said. The authority in its verdict also quoted from email
chats of Deutsche Bank traders, with one writing that a benchmark
was "a corrupt fixing and DB is part of it!"
Deutsche Bank on Wednesday said it added EUR1.5 billion ($1.61
billion) in litigation reserves in the first quarter, on top of the
EUR3.2 billion it had previously set aside. The lender is the
latest of several large European banks to be punished by U.S.
regulators in recent months. Last year, BNP Paribas SA paid nearly
$9 billion and pleaded guilty to violating U.S. sanctions.
Germany's second largest lender, Commerzbank AG, paid $1.45 billion
in March for a similar matter.
Deutsche Bank in 2013 was among a handful of U.S. and European
banks that paid billions to settle a European Union antitrust
investigation involving interest-rate manipulation. As part of that
deal, Deutsche Bank paid a total of about EUR725 million.
Thursday's settlement means Deutsche Bank's total tab for rate
manipulation is now about $3.5 billion--roughly double the amount
doled out by the No. 2 bank, UBS AG, which paid $1.5 billion in
late 2012.
Worldwide, banks have paid a total of over $7 billion of
penalties for Libor-rigging offenses.
Resolving Libor would end one of Deutsche Bank's largest
outstanding legal issues. The bank has paid more than EUR5 billion
over recent years for settlements and fines, stemming mostly from
actions linked to the financial crisis.
Authorities are still investigating separate allegations that
Deutsche Bank was involvement in efforts to manipulate
foreign-exchange markets. People familiar with the matter say the
bank is likely to face an even higher fine than for the Libor case.
The investigation is expected to drag into the second half of the
year. Deutsche Bank is also being probed for alleged violations of
U.S. sanctions on Iran and other countries.
Write to Eyk Henning at eyk.henning@wsj.com
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