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Banks (Finance)

Deutsche Bank Agrees to Pay $775 Million in Penalties for Manipulating LIBOR

Strategic Insights

— 2 min read

The U.S. Department of Justice announced that Deutsche Bank AG and its subsidiary DB Group Services (UK) Limited have agreed to pay $775 million in criminal penalties for their role in manipulating the London Interbank Offered Rate (LIBOR), a leading benchmark interest rate used in financial products and transactions worldwide. The settlement marks the largest penalty to date in the LIBOR investigation and brings the total amount of penalties to approximately $2.519 billion. In addition to the $775 million in criminal penalties, Deutsche Bank will also pay $625 million in penalties as part of a deferred prosecution agreement, and retain a corporate monitor for three years.

Key Takeaways:

  • Deutsche Bank and its subsidiary DB Group Services (UK) Limited have agreed to plead guilty to wire fraud and antitrust charges in connection with their role in manipulating U.S. Dollar LIBOR and engaging in a price-fixing conspiracy to rig Yen LIBOR.
  • The bank will pay a total of $775 million in criminal penalties, in addition to the $625 million in penalties as part of a deferred prosecution agreement.
  • Deutsche Bank has agreed to continue cooperating with the government's investigation and has implemented remedial measures, including an enhanced compliance program.
  • The bank's misconduct affected the resulting LIBOR fix on various occasions, with traders requesting that LIBOR submitters submit contributions favorable to their trading positions.
  • Deutsche Bank admitted to working with other banks to manipulate LIBOR contributions, including a scheme to move Yen LIBOR up a bit to benefit a UBS trader.
  • The Department of Justice considered the bank's cooperation with the government's investigation, but also noted that it fell short in some important respects.
  • The deferred prosecution agreement does not prevent the Justice Department from prosecuting culpable individuals for related misconduct.
  • The investigation into LIBOR manipulation is ongoing, with charges brought against 12 individuals, three of whom have pleaded guilty.

Statistics:

  • Approximately $2.519 billion in total penalties, including $775 million in criminal penalties and $625 million in penalties as part of a deferred prosecution agreement.
  • 12 individuals charged in the investigation, with 3 individuals having pleaded guilty.
  • 3-year term of the deferred prosecution agreement for Deutsche Bank.
  • 6 major financial institutions have admitted misconduct in the LIBOR investigation, including Barclays Bank PLC, UBS AG, The Royal Bank of Scotland plc, Coöperatieve Centrale Raiffeisen-Boerenleenbank B.A. (Rabobank) and Lloyds Banking Group plc.

Sources:

  • U.S. Department of Justice
  • Deutsche Bank AG
  • DB Group Services (UK) Limited
  • Commodity Futures Trading Commission (CFTC)
  • New York Department of Financial Services (DFS)
  • U.K. Financial Conduct Authority (FCA)
  • Securities and Exchange Commission (SEC)
  • Serious Fraud Office (SFO)
  • BaFIN
  • European Central Bank (ECB)
  • President Barack Obama's Financial Fraud Enforcement Task Force

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