German banking giant Deutsche Bank and its UK subsidiary will pay a record a $775 million fine for rigging interest rates in a multi-bank conspiracy that undermined global financial markets, the US Department of Justice said Tuesday.
Deutsche Bank’s London subsidiary DB Group Services, where most of those who manipulated the rate worked, signed a plea agreement with the government in which it admitted its criminal conduct and agreed to pay $150 million in fines.
In addition, Germany’s biggest bank agreed to pay additional $625 million criminal penalty for manipulating the London Interbank Offered Rates (LIBOR) for the US dollar and several other currencies, which is used to peg millions of interest rate-sensitive contracts and loans around the world. Further, it agreed to admit and accept responsibility for its misconduct, designed to boost its trading positions, and will continue to cooperate in the Justice Department’s continuing investigation. US authorities also said that independent monitors would be installed.
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Per the Justice Department, Deutsche Bank engaged in the misconduct from at least 2003 through early 2011. However, the deal allows the bank to keep its operating license in the United States. The bank’s New York branch has more than 1,700 employees and total assets exceeding $152 billion.
“Numerous Deutsche Bank derivatives traders – whose compensation was directly connected to their success in trading financial products tied to LIBOR – engaged in efforts, many times in conjunction with other banks, to move these benchmark rates in a direction favorable to their trading positions. Specifically, the derivatives traders requested that LIBOR submitters at Deutsche Bank and other banks submit contributions favorable to trading positions, rather than the accurate rates that complied with the definition of LIBOR. Through these schemes, Deutsche Bank defrauded counterparties who were unaware of the manipulation,” according to the plea agreement.
The penalty – the biggest in a seven-year investigation that has hurt the banking industry’s reputation – takes the total fines imposed on the German lender to approximately $2.519 billion. In addition to today’s settlement, Deutsche Bank paid $800 million to the US Commodity Futures Trading Commission, $600 million to the New York Department of Financial Services and $344 million to Britain’s Financial Conduct Authority.