Deutsche Bank and its wholly owned subsidiary, DB Group Services (UK) Limited, today pleaded guilty to wire fraud for its role in manipulating the London Interbank Offered Rate and agreed to pay $775 million in criminal penalties to the Department of Justice, bringing the total amount of penalties against the bank to $2.5 billion.
“Deutsche Bank is the sixth major financial institution that has admitted its misconduct in this wide-ranging criminal investigation, and today’s criminal resolution represents the largest penalty to date in the LIBOR investigation,” said Assistant Attorney General Leslie Caldwell.
DB Group Services (UK) Limited has agreed to plead guilty to one count of wire fraud, and to pay a $150 million fine, for engaging in a scheme to defraud counterparties to interest rate derivatives trades by secretly manipulating U.S. Dollar LIBOR contributions.
In addition, Deutsche Bank entered into a deferred prosecution agreement and admitted its role in manipulating LIBOR and participating in a price-fixing conspiracy in violation of the Sherman Act by rigging Yen LIBOR contributions with other banks. The agreement requires the bank to continue cooperating with the Justice Department in its ongoing investigation, to pay a $625 million penalty beyond the fine imposed on DB Group Services (UK) Limited and to retain a corporate monitor for the three-year term of the agreement.
Other regulatory penalties and disgorgement Deutsche Bank has incurred include:
$800 million to the Commodity Futures Trading Commission;
$600 million as a result of a New York Department of Financial Services; and
$344 million as a result of a U.K. Financial Conduct Authority.
According to the agreements, from at least 2003 through early 2011, numerous Deutsche Bank derivatives traders—whose compensation was directly connected to their success in trading financial products tied to LIBOR—engaged in efforts 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 rates that complied with the definition of LIBOR. Through these schemes, Deutsche Bank defrauded counterparties who were unaware of the manipulation.
Deutsche Bank admitted that the conduct affected the resulting LIBOR fix on various occasions. Deutsche Bank further admitted that its employees engaged in this misconduct through face-to-face requests, electronic communications, which included both e-mails and electronic chats, and telephone calls. Deutsche Bank also admitted to working with other banks to manipulate LIBOR contributions.
The five other banks that previously have reached resolutions with the Justice Department for their roles in manipulation of benchmark interest rates are Barclays Bank, UBS, Royal Bank of Scotland, Rabobank, and Lloyds Banking Group. The Justice Department has also charged 12 individuals as a result of this investigation, and three of those individuals have pleaded guilty.