The United States Department of Justice (USDOJ) announced yesterday that Deutsche Bank and DB Group Services (UK) Limited (DBGS), a wholly owned subsidiary of Deutsche Bank AG (Deutsche Bank), were sentenced for manipulating London Interbank Offered Rates (LIBOR) for U.S. Dollar and several other currencies.
Deutsche Bank, the Frankfurt, Germany-based parent company of DBGS. LIBOR is a benchmark rate that many of the globe’s leading banks charge each other for short-term loans. LIBOR is an acronym for IntercontinentalExchange London Interbank Offered Rate. It is used to calculate interest rates on various loans.
DB Group Services pleaded guilty to one count of wire fraud for its role in manipulating LIBOR benchmark interest rates. According to the USDOJ, DBGS signed a plea agreement with the government in which it admitted its criminal conduct and agreed to pay a $150 million fine.
Deutsche Bank also entered into a deferred prosecution agreement (DPA) with the Justice Department requiring the German Bank to pay an additional $625 million criminal penalty, to admit and accept responsibility for its misconduct and to continue cooperating with the Justice Department in its ongoing investigation. The DPA also requires Deutsche Bank to retain a corporate monitor for three years.
The scheme lasted from at about 2003 through early 2010. Traders at Deutsche Bank whose compensation was tied to the LIBOR often colluded with other banks to manipulate benchmark rates in a direction favorable to their trading positions. The scheme had an affect the resulting LIBOR fix on multiple occasions.
The USDOJ said that together with approximately $1.744 billion in regulatory penalties and disgorgement – $800 million as a result of a Commodity Futures Trading Commission (CFTC) action, $600 million as a result of a New York Department of Financial Services (DFS) action and $344 million as a result of a U.K. Financial Conduct Authority (FCA) action – the Justice Department’s criminal penalties bring the total amount of penalties to approximately $2.519 billion.