the german bank is liable for the highest single fine of 725 million euros for illegal agreements on two interest rates at the same time. EU competition commissioner joaquIn almunia called the extent of cheating on reference rates like libor and euribor shocking in brussels on wednesday: "it’s about punishment and deterrence." almunia announced further steps against banks for exchange rate swindling: "this is not yet the end of the story."
According to the EU’s anti-trust watchdog, banks from Europe and the USA have manipulated interest rates in their favor in order to pocket trading profits. It was about different reference interest rates like the euribor, the libor and the tibor. These are based on information from banks. The banks’ traders are said to have colluded prior to the daily report. Interest rates are used as a benchmark for transactions worth billions – from construction loans to complex derivatives. The tricks took place from 2005 to 2010.
the german bank received the highest fine because, according to the eu, it was involved in both the euribor and libor scandals. the fine was largely covered by the bank’s provisions for legal disputes, the money house said in a statement. The settlement of the legal dispute is an important step in the deutsche bank’s efforts to clean up legacy issues, said the heads of the major bank, jurgen fitschen and anshu jain. They emphasized that individual employees had acted wrongly. "we will do everything we can to ensure that this type of misconduct does not happen again."
the institutions fined also include the royal bank of scotland, the french societe generale, and the u.S. banks citigroup and jpmorgan. British barclays and Swiss UBS avoid fines because they acted as key witnesses in informing the antitrust authorities about the manipulation.
Reference rates are also important for private borrowers because variable-rate loans depend on them. According to EU data, this applies to 40 percent of consumer loans in europe. In Germany, however, such attacks are not as widespread as in other countries, for example among house builders. Almunia said: "the manipulation of interest rates affects millions of consumers, for example because mortgage interest rates are linked to it."the eU commission will resolutely combat and sanction cartels in the financial sector.
In statements, the banks concerned laid the blame for the interest rate manipulations at the door of individual employees. societe generale – which must pay 446 million euros and accepts the fine – stated that the criminal acts were carried out without the knowledge of management. The employee responsible has meanwhile left the bank, and controls have been tightened. The fine had no impact on the forecasts for fiscal 2013. RBS chairman sir philip hampton said RBS has now introduced stronger controls.
In terms of fines, societe generale must pay the second-highest amount, followed by RBS with 391 million euros. JP morgen and Citigroup are responsible for 80 million and 70 million euros respectively, while the British broker RP martin has to pay 247,000 euros. the scandal of manipulated interest rates has become a worldwide case. The EU authority has been investigating for two years. Supervisors worldwide have so far issued fines totaling around 3.7 billion dollars because of the libor scandal. The previous record fine was imposed on the Swiss bank UBS, amounting to 1.5 billion US dollars (1.1 billion euros). RBS and barclays have also been prosecuted. More than a dozen institutes under investigation.
The big banks have been proven to have manipulated interest rates for years in order to pocket higher profits. The london interbank offered rate (libor), for example, indicates the conditions at which banks lend money to each other. The euribor is virtually the euro variant, the tibor for the yen.
To prevent manipulation in the future, the eU commission presented draft legislation in september. Libor and euribor to be determined in future only under official supervision. Interest rate falsifiers face heavy fines and prison sentences. The new rules could apply from 2015 at the earliest.
regulators around the globe have been investigating other financial guardrails, such as the pricing of gold and siber, as well as the possibility of manipulating currency prices. However, the german banking supervisory authority bafin does not yet see any reason for a special investigation into suspected manipulation of exchange rates, as a spokesman said in response to a query.