Deutsche Bank AG was ordered to pay a record $2.5 billion fine and fire seven employees to settle U.S. and U.K. investigations into its role in rigging Libor.
Deutsche Bank must terminate six London employees and one in Frankfurt who engaged in wrongful conduct, according to Thursday's settlements. While the DFS didn't identify them by name, one is a managing director, four are directors and two vice presidents. A U.K. unit agreed to plead guilty to a wire- fraud charge as well.
"Deutsche Bank employees engaged in a widespread effort to manipulate benchmark interest rates for financial gain," New York Department of Financial Services Superintendent Benjamin Lawsky said in a statement. "We must remember that markets do not just manipulate themselves: It takes deliberate wrongdoing by individuals."
The penalty is the biggest yet in the interest-rate rigging scandal and eclipses that paid by UBS Group AG. The agreements, detailing repeated misconduct by employees as well as the bank's own foot-dragging in dealing with investigators, deal a set-back to Co-Chief Executive Officers Anshu Jain and Juergen Fitschen as they prepare to announce their plan to overhaul Deutsche Bank.
"We deeply regret this matter," Jain and Fitschen said in an e-mailed statement. "This agreement marks another step in addressing the past."
The Frankfurt-based bank said the investigations found no current or former management-board member to have been involved in or aware of the misconduct.
Shares were down 0.7 percent to 31.37 euros as of 3:16 p.m. in Frankfurt trading.
From 2003 to 2011, Deutsche Bank traders regularly asked rate submitters to make submissions that would benefit their trading positions, according to the Justice Department. On Sept. 7, 2006, a London desk head asked a Barclays Plc trader to help him get a low rate for Euribor, which is the euro equivalent of Libor. "I'm begging u, don't forget me... pleassssssssssssssseeeeeeeeee... I'm on my knees..." the e-mail said, according to DFS.
In addition, Deutsche Bank gave an "unacceptably slow and ineffective response" to investigators' requests, and misled to regulators on occasion, significantly slowing the case down, the U.K. Financial Conduct Authority said in its announcement.
The misconduct involved at least 29 Deutsche Bank individuals including managers, traders and submitters, primarily based in London but also in Frankfurt, Tokyo and New York, the FCA said.
In an effort to manipulate Libor, Deutsche Bank traders coordinated their Libor submissions with dealers at other firms, including at Barclays, BNP Paribas SA, Citigroup Inc., Merrill Lynch, Societe Generale SA and UBS, according the the settlements.
"Deutsche Bank's failings were compounded by them repeatedly misleading us," Georgina Philippou, the FCA's acting director of enforcement and market oversight, said. "The bank took far too long to produce vital documents and it moved far too slowly to fix relevant systems and controls."
The U.S. Commodity Futures Trading Commission fined the bank $800 million. The Justice Department levied a $775 million penalty and will install a monitor at the bank for three years to ensure compliance with the terms of the deferred prosecution agreement. Both pots will go to the U.S. Treasury. Lawsky's agency will receive $600 million. New York state lawmakers decide what to do with money the DFS receives.
The FCA settlement came to 227 million pounds ($341 million). The British government usually decides how the money is used, and has given its share to military charities.
Deutsche Bank is one of the last to reach a settlement with U.K. and U.S. authorities in the London interbank offered rate probes, though it has already paid 725 million euros to settle a European Union antitrust investigation.
Thursday's settlement brings the total global fines for the scandal to about $9 billion, paid by a dozen firms. UBS paid $1.5 billion in 2012, the biggest prior to Deutsche Bank.
Deutsche Bank was once one among more than a dozen banks surveyed daily by the British Bankers' Association on their borrowing costs. The BBA would use their responses to calculate the London interbank offered rate, a benchmark used in more than an estimated $300 trillion of securities, from interest-rate swaps to mortgages and student loans. During the crisis, as it became harder to access credit, banks began to understate their borrowing costs to make themselves seem healthier.
The settlement comes on top of the 7.1 billion euros ($7.6 billion) Deutsche Bank has spent on litigation in the last three years. The firm still faces legal challenges including probes into foreign exchange, mortgage- and asset-backed securities dealings and alleged U.S. sanctions violations.
Deutsche Bank said it will log 1.5 billion euros for Libor and other matters in the first quarter, while it still expects to report a profit for the first quarter on near-record revenue. It set aside 3.2 billion euros in legal reserves at the end of December, the firm said in a presentation on Jan. 29. The bank doesn't provide details on the reserves.
Bafin, Germany's financial market regulator, has also been scrutinizing Deutsche Bank's role in setting Libor, including what Jain knew about the behavior, people with knowledge of the situation have said. The agency has yet to complete its probe.