Thursday, April 23, 2015

Deutsche Bank will pay $ 2.5 billion fine for manipulating rate LIBOR – RBC

Photo: Fotobank / Getty Images

The largest German bank Deutsche Bank will pay $ 2.5 billion to regulators and the US and UK dismiss several top managers because traders Bank from 2005 to 2009 systematically manipulated key interbank rate, including LIBOR. The bank will pay $ 600 million to the Office for Control of financial services in New York State (NYDFS), $ 800 million – the Commission Commodity Futures Trading US $ 775 million – US Department of Justice and the £ 227 million ($ 340 million) – Financial Supervisory Authority UK, according to a press release from the New York regulator.

«Employees Deutsche Bank manipulated basic interest rates (benchmarks) for the purpose of financial gain,” – said in a press release NYDFS, participated in the investigation, along with other oversight bodies.

The penalty Deutsche Bank as part of a settlement agreement with regulators – a record for the manipulation of the base rate, which were opened around the world after the financial crisis of 2008-2009. Prior to this, the largest fine relating to LIBOR, was $ 1.5 billion (UBS, December 2012).

In Hamburg account

Deutsche Bank in 2013, has been fined by the European Commission to € 725 million for participating in a cartel with other banks to manipulate financial instruments tied to interest rates LIBOR and EURIBOR. Thus, in view of the Deutsche Bank will pay the penalty for fraud with rates of about $ 3.5 billion. Total global banks have been punished in the amount of more than $ 7 billion for offenses related to LIBOR.

In addition, Deutsche Bank has undertaken to lay off seven senior hundred mines its offices in London and Frankfurt. Work will lose four directors, two vice-president and managing director, whose names were not disclosed.

Today’s agreement is the result of which lasted four years of investigation, which involved supervisors USA, UK, Japan, the European Union and Switzerland. Checking affected the activities of seven banks in 2005-2009. LIBOR defendants in the case were the leading international financial institutions: UBS, Citigroup, Bank of America, Barclays, Royal Bank of Scotland, JPMorgan Chase and Deutsche Bank.

The Case of the benchmark rate manipulation – not only the investigation under way against Deutsche Bank. Activities lender also check for irregularities in foreign exchange, mortgage transactions, transactions with assets collateralized by securities, as well as for possible breaches of US economic sanctions.

What is LIBOR

LIBOR (London Interbank Offered Rate) is the weighted average interest rate on interbank loans in the London market, calculated on the basis of information provided by major financial institutions. LIBOR rate depends on the swap market and debt market, as well as a number of retail financial products such as mortgages and student loans. LIBOR is used to determine interest rates on loans and the value of financial derivatives totaling $ 300 trillion globally. Since 1985, the rate was fixed daily British Bankers’ Association (BBA), but in 2014 her supervision was transferred to Intercontinental Exchange Benchmark Administration – an independent division of Intercontinental Exchange.

When calculating LIBOR rate information is not used on the actual rate on interbank loans and on the estimated cost of borrowing. This opened a wide scope for artificial under- or over-rates. As it turned out during the investigation, from 2005 to 2009, some traders Deutsche Bank regularly asked their colleagues in other banks to submit distorted data that could be used to improve their own trading positions. In addition, they contacted in advance with colleagues from other banks to discuss and agree on the data that the latter should have to submit to calculate reference rates. Managed to prove fraud by analyzing the electronic communications traders who have access to the controls.

What are copied Traders

The trader DB (T1): The old man, pliz, gave us a 6-month libor higher today?

part of the trader (T2): No question, my friend, how much do you want?

T1: 9.5 will be just right.

T2: swept out by himself at 9 planned.

The vice-president of one of the offices of DB – the trader: “The rate of Tibor – solid scheme, and DB is involved! »

A member of the London office of DB – trader Barclays, asking for lower data EURIBOR:« I beg you, do not forget about me, pliiiiiiiz kneeling ask … »

(materials NYDFS)

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