Deutsche Bank faces fine for rate rigging from watchdogs

FRANKFURT - Reuters

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Deutsche Bank faced a multi-billion-dollar fine on April 23 as British and U.S. officials prepared to announce a legal settlement over alleged attempts at its London-based subsidiary to manipulate interest rate benchmarks. 

Shares in Germany’s largest bank - whose unit may make an admission of guilt - were little changed after Deutsche said late on April 22 that it planned to top up its legal provisions by 1.5 billion euros ($1.6 billion) this year. 

Deutsche Bank is likely to pay more than $2 billion to U.S. and British authorities over the attempted manipulation of rates, more than any other bank has been penalized over the rate rigging. Negotiations also are expected to result in a guilty plea by a unit of the German bank. 

Deutsche is among the last of the major banks to come to terms with authorities following an investigation of the London interbank offered rate, or Libor, which banks charge each other for short-term loans. In 2012, Switzerland’s UBS AG agreed to pay $1.5 billion in a global settlement, while Britain’s Barclays Plc  paid $453 million. “We continue to work with the authorities that are reviewing interbank offered rates matters,” Deutsche said in a statement. Despite the costs, it said it would be profitable in the first quarter and would report near record revenues. 

Deutsche Bank ranks among the top investment banks globally with large operations in London and New York. It has been caught up in a long list of investigations including into alleged attempts to manipulate currency benchmarks and alleged violations of U.S. sanctions on Iran. 

Deutsche’s UK division is central to group strategy and is home to some of its most important investment banking operations. It is the group’s third-biggest unit after Germany and North America, making 4.8 billion euros in revenue in 2014, or 15 percent of the company’s top line. The U.S. division, also dominated by investment banking, made 8.1 billion euros in revenue last year. 

Credit analyst Jacques-Henri Gaulard at Scope Ratings said the 1.5 billion euro charge signalled that the bank was unlikely to need to raise additional capital to cope with other fines and settlements expected to follow Libor. 

The top 10 U.S. and European banks paid 47 billion euros in fines last year, according to a study by consultancy EY. “U.S. authorities are especially alert at the moment and are imposing sometimes draconian fines,” said EY partner and banking specialist Dirk Mueller-Tronnier.