Deutsche Bank fined £1.7BILLION for rigging Libor interest rates and then destroying records
- Fines collected by UK regulator go towards charitable causes
- Lloyds, Barclays and Royal Bank of Scotland have already paid out over the Libor rigging scandal
- Deutsche Bank misled the regulator during its investigation and took too long to reform
Deutsche Bank has been hit with fines totalling £1.7billion by US and British regulators for rigging Libor rates.
Libor is the interest rate used to set the price at which banks lend money to each other. It is used as a benchmark for trillions of dollars-worth of financial products, including UK residential mortgages.
Over a period of five years to 2010 traders at the bank colluded and manipulated rate submissions.
The UK's Financial Conduct Authority today slapped Deutsche Bank with a record fine of £227million while other fines totalling £532million came from authorities in the United States, including the Commodities Futures Trading Commission.
Fined: Deutsche Bank must pay £1.7billion to regulators over the failings (Pictured: Deutsche Bank's trading floor in London)
The fine is so large because the German bank repeatedly misled the regulator and took far too long to reform practices once its misconduct had been found out, the FCA said.
Other failings made the investigation much harder for the regulator. In one instance, Deutsche Bank in error destroyed 482 tapes of telephone calls pertinent to the investigation.
The UK regulator added that a culture of generating profits without regard to the integrity of the market appeared 'deeply ingrained' in some areas of the bank and not merely limited to a few individuals.
British banks Lloyds, Barclays and Royal Bank of Scotland have already faced fines adding up to hundreds of millions of pounds over the Libor scandal. Barclays paid out £59.5 million and Royal Bank of Scotland £87.5million.
The settlements follow allegations that banks formed cartels to fix the rates.
Money collected by the British regulator go straight to the Treasury and is divvied up for good causes.
Since 2013 three military charities have shared £1.3million from the fines to support soldiers, provide tickets to events and pay for holidays for bomb disposal teams.
In this year's Budget, the chancellor George Osborne earmarked a further £75million of Libor fines for charitable causes, including £25million to help older veterans, extra funding for regiments that saw service in Afghanistan, £3million for the Royal British Legion and £5million to fund research into battlefield trauma.
Crackdown: The FCA fined Deutsche Bank £227million over the scandal
Georgina Philippou, the FCA's acting director of enforcement and market oversight, 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.'
The misconduct stretched across the globe, primarily at the bank's London office but also in Frankfurt, Tokyo and New York.
The traders involved colluded with other banks to change the rates, create bids so it appeared there was a greater supply than there was to change the rate, and influenced others to change rates.
The misconduct went unchecked because Deutsche Bank did not have correct controls in place. Its systems to track traders' misconduct was also 'defective', which meant it took over two years to identify and produce all relevant recordings requested by the regulator.
The FCA investigation found evidence of correspondence between colluding traders spanning several years.
Requests were sent between traders such as 'Could you pls have a low six month fix today old bean?' and 'Could I beg you for a low three month [Euribor] fixing today please...that would be the best xmas present ;)'.
The FCA concluded: 'Deutsche Bank is a large, sophisticated and well-resourced financial services institution. Serious breaches by firms such as Deutsche Bank merit the highest penalties.'
It added: 'The Authority does not conclude that Deutsche Bank as a firm engaged in deliberate misconduct.
'Nevertheless, the misconduct of Deutsche Bank's employees and Managers was at least reckless and often deliberate. Deutsche Bank's cultural shortcomings and systems and controls failings allowed this misconduct to persist over an extended period of time.'
Jurgen Fitschen and Anshu Jain, co-chief executive officers of Deutsche Bank, said: '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.
'This agreement marks another step in addressing the past and ensuring that the Bank earns back the trust of its clients, shareholders and society at large.'
Deutsche said no current or former member of its management board was found to have been involved in or aware of the traders' misconduct.
It said it had worked 'intensively' investigating the matter, with an internal inquiry involving the collection of more than 150 million electronic documents and 850,000 audio files.
The Bank said it recognised there were 'defects and delays in collecting and producing documents and audio'.
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