Libor Fixing Scandal: German Regulator Completes First Leg of Deutsche Bank Probe

Germany's financial regulator will submit a report to Deutsche Bank over its role into the possible manipulation in one of the world's most important interbank lending rates Libor after a launching a probe at the beginning of this year.

According to unnamed sources cited in media reports, Germany's Federal Financial Supervisory Authority (BaFin) has found no evidence of wrongdoing on the part of members of the management board but will continue 'aspects of its probe' into DB and more than a dozen other banks.

Libor, and Euribor, is used to underpin trillions of dollars of financial products from derivatives to mortgages and credit card loans.

After Barclays settled with UK and US authorities in June 2012 for Libor rigging, followed by UBS later that year and RBS in 2013, authorities around the world have launched separate investigations into a raft of banks.

Deutsche Bank said in a media statement that "the bank is cooperating in the various regulatory investigations and conducting its own ongoing review into the interbank offered rates matters."

BaFin representatives did not immediately return a call for comment at the time of publication.

Investigations Around the World

In June last year, Barclays became the first bank to settle with US and UK authorities for a record £290m ($456m / €340m) fine for the manipulation of Libor and Euribor.

In December, UBS became the second bank to settle with authorities, for $1.5bn, over its role in Libor manipulation and admitted to one criminal charge of wire fraud.

In February this year, RBS agreed to pay £390m ($612m / €451m) to settle US and UK charges related to the manipulation of the benchmark lending rate known as Libor, as well as pleading guilty to a criminal charge of wire fraud from a Japanese subsidiary.

In January this year, Deutsche Bank confirmed to IBTimes UK that it has been co-operating with BaFin over a number of probes, including another ongoing investigation into the possible rigging of another major interbank lending rate Libor.

"[Since] July 2012 Deutsche Bank has received requests for information from regulators in connection with setting interbank offered rates for various currencies. Deutsche Bank is co-operating with these investigations," said the spokesperson.

At the time, German media reported that three other lenders were also under a BaFin investigation into the possible rigging of Euribor.

It has already added that it was cooperating with investigations in the United States and Europe in connection with setting rates between 2005 and 2011 while sources say it has set aside provisions for a possible fine.

Analysts say this amount is around €500m.

Jail Time for Bankers?

While reports say that BaFin has not found evidence of wrongdoing on the part of members of the management board it does mean that it is unlikely that the regulator will force senior executives to resign, even if it finds that the bank had manipulated interbank lending rates.

Under German law, BaFin has the authority to force management board members to resign.

The source close to the investigation added in the report that "in some cases we have to dig deeper and ask, were some people really innocent?"

Elsewhere, the UK's Serious Fraud Office confirmed it has gathered extensive evidence against of the former UBS and Citi trader Tom Hayes for his role in the manipulation key interbank lending rates.

On 18 June, the SFO charged Hayes with eight counts of fraud, in connection with the investigation by criminal investigation unit into the manipulation of Libor.

The SFO confirmed he was one of the three individuals arrested and interviewed on 11 December, 2012.

In July two former brokers with RP Martin Holdings were charged by the SFO with conspiracy to defraud over Libor rates.

The SFO said that it had charged Terry Farr, 41, and James Gilmour, 48, who were both arrested alongside former Citi and UBS trader Tom Hayes in December 2012 on suspicion of manipulating rates.

The RBS was the third and most recent bank to settle with US and UK authorities related to civil charges related to the manipulation of Libor and in a Q&A session following the settlement, RBS Chairman Philip Hampton said "if people break the law they should face the full weight of the criminal justice system. We have already seen traders at other banks arrested over Libor manipulation and I expect we will see more."