Deutsche Bank in record $2.5bn fine over interest rate manipulation

Deutsche Bank has been fined $2.5bn (£1.66bn) by US and UK regulators for trying to manipulate interest rates.

The German bank will pay more than $2bn to US regulators, while the UK's Financial Conduct Authority (FCA) has imposed a £227m fine.

The fine relates to manipulation of the Libor and Euribor inter-bank rates.

The penalty is a record for such misconduct because Deutsche tried to mislead regulators and could have hampered the investigation.

In 2012, Switzerland's UBS agreed to pay $1.5bn in a global settlement, while the UK's Barclays paid $453m.

'Deeply ingrained'

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." 

"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," she said.

The misconduct involved at least 29 Deutsche Bank individuals, including managers and traders, mainly based in London but also in Frankfurt, Tokyo and New York. It took place between 2005 and 2009.

'Fundemental'

Libor and Euribor are benchmark interest rates, influencing the setting of other rates. They are used as a barometer to measure the health of the banking system and as a gauge of market expectation for future central bank interest rates.

The FCA said they "are fundamental to the operation of both UK and international financial markets".

But traders colluded to set these benchmark rates, hoping to improve their trading positions. The regulators released email exchanges between traders and submitters - the people who provide the information on which rate Libor and Euribor is set each day.

One exchange said: "Can we have a high 6mth libor today pls gezzer?" The submitter agreed, "Sure dude, where wld you like it mate ?"

In another exchange about how the rates are set, one banker said: "people just randomly make those numbers up".

The New York Department of Financial Services said that Deutsche still employs some people involved in the misconduct, and has demanded their dismissal.

About 10 individuals have already had their employment ended, the DFS said, but it added: "However, certain employees involved in the wrongful conduct remain employed at the Bank.

"The Department orders the Bank to take all steps necessary to terminate seven employees, who played a role in the misconduct but who remain employed by the Bank: one London-based Managing Director, four London-based Directors, one London-based Vice President, and one Frankfurt-based Vice President."