Thursday

22nd Feb 2018

Deutsche Bank among seven banks investigated for UK rate fixing

  • Deutsche Bank skyscraper in Frankfurt: The German giant was involved in British rate fixing? (Photo: orkomedix)

US prosecutors are investigating seven banking giants, including Germany's Deutsche Bank, for involvement in alleged fixing of the British interbank rate (Libor).

Apart from Germany's largest commercial bank, the US probe targets two American giants, JP Morgan Chase and Citigroup, Switzerland's UBS and three British banks - Barclays, Royal Bank of Scotland and HSBC, sources familiar with the investigation told Reuters and Bloomberg news wires.

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The subpoenas demand emails and documents exchanged between bank CEOs potentially exposing their role in the interbank rate fixing.

Over a dozen banks are suspected to have manipulated the interbank rate between 2005-2009, which is agreed daily in London among top bank managers based on how much they think they would lend to each other. Libor has an impact on hundreds of trillions of euros worth of transactions, mortgages, loans and credit cards.

Similar investigations are carried out in Britain and Germany, but there Deutsche Bank has obtained protection from prosecution in exchange for information on the case, according to Handelsblatt.

If prosecuted, the German bank could face hundreds of millions of euro in fines. This happened to Barclays, whose top manager Bob Diamond resigned in June after the bank admitted foul play and was fined €360 millions for involvement in the Libor rate fixing.

So far, the German bank is defending its top management, which changed earlier this year. In charge of the bank at the time of the Libor case was Josef Ackermann, a Swiss banker who also negotiated the terms of the second Greek bailout, which included losses for private banks.

Ackermann is the one who transformed Deutsche Bank into an international, investment-oriented bank, including risky investments on the US subprime mortgage market which led to the financial crisis in 2008. Celebrated in June at a gathering of top bankers for his high-level contacts to politicians and EU policy-makers, Ackermann was at the centre of a party held in Hamlet's castle in Denmark, complete with a rented opera singer and painter who drew his portrait.

Settlement in Iran case

Meanwhile another British bank admitting foul play, Standard Chartered, settled with US regulators on €277 million as fine for having carried out secret transactions with Iran, despite a trade embargo with the Middle Eastern state.

Prosecutors had charged the bank of designing "an elaborate scheme" between 2001 and 2011 which allowed its US-based branch to carry out dealings with Iran, leaving the US financial system "vulnerable to terrorists, weapons dealers, drug kingpins and corrupt regimes."

HSBC, Europe's largest commercial bank, has also been accused by the US Senate of similar dealings with Iran.

Investigation

Big banks: From Greek bailout to Hamlet's castle

A lobby for the world's biggest banks - the International Institute of Finance - became a key EU player when it negotiated the debt cut on Greece's second bailout. Its world of rented castles and sopranos shows losses were bearable.

Analysis

We are not (yet) one people

Talks on the next EU budget will start on Friday. Brussels wants to do much more than before – and needs a lot more money. But arguing about funds won't be enough.

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