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London - Deutsche Bank on Thursday agreed with US and British authorities to pay a record $2.5bn to resolve investigations it manipulated benchmark interest rates used to price loans and contracts around the world.
As part of the deal, Deutsche Bank's London-based subsidiary pleaded guilty to criminal wire fraud and the parent group entered into a deferred prosecution agreement to suspend criminal charges.
Authorities also ordered Germany's largest lender to fire seven employees and accused the bank of obstructing regulators.
The penalty is the biggest in a seven-year rate-rigging investigation by regulators who have accused some of the world's largest financial institutions of tainting markets with fraud and collusion. It takes the total fines imposed to around $8.5bn. Twenty-one people also have faced criminal charges.
Other banks and individuals are still under investigation for potential manipulation of the London Interbank Offered Rate, known as Libor, said Leslie Caldwell, Assistant Attorney General at the US Justice Department. Britain's Financial Conduct Authority also said on Thursday its investigation was on-going.
"Our Libor investigation is far from over," Caldwell said in a conference call after the Deutsche agreement was announced.
US authorities fined Deutsche Bank $2.12bn and UK watchdogs imposed a $340m penalty for its role in a scam that ran from around 2003 to 2011 to fix rates such as the Libor to benefit their trading positions. The benchmark rates are used to price hundreds of trillions of dollars of financial transactions by banks and companies worldwide.
Slamming Germany's largest lender for "cultural failings," authorities blamed senior staff for misleading them and said the bank was slow to cooperate.
Staff under fire
New York's banking regulator, led by superintendent Benjamin Lawsky, ordered the bank to take steps to fire six London-based employees, including a managing director, four directors and a vice president, plus a Frankfurt-based vice president.
Other employees involved in the misconduct had already left the bank, Lawsky said.
The bank agreed to install independent monitors, as part of its deals with US authorities.
Britain's FCA said at least 29 Deutsche Bank employees including managers, traders and submitters were part of the scam based mainly in London but also in Frankfurt, Tokyo and New York.
It also accused senior bank employees of recklessness by falsely claiming the bank's German regulator BaFin had prevented it from sharing a crucial report with the UK watchdog.
During the investigation, the German bank destroyed 482 tapes of telephone calls by mistake - and provided inaccurate information about whether other records existed.
"This case stands out for the seriousness and duration of the breaches by Deutsche Bank - something reflected in the size of today's fine," said Georgina Philippou, the FCA's acting director of enforcement and market oversight.
The bank's joint chief executives Juergen Fitschen and Anshu Jain said no current or former management board member had been found to have been involved in or aware of the misconduct. "We deeply regret this matter but are pleased to have resolved it," they said in a joint statement.
'On my knees...'
Deutsche Bank's traders conspired with competing traders, too, "amplifying the effect of their manipulation," said U.S. Assistant Attorney General Bill Baer.
US and UK authorities published pages of traders' requests for rate changes. In one, a Deutsche London desk head tred to persuade a Barclays banker to lower rates with a message: "I'm begging u, don't forget me pleassssssssseeeeeeee I'm on my knees"
Bank staff also bragged about the power of Deutsche Bank's Frankfurt and London offices. In an email to the head of Deutsche Bank's Global Finance Unit, one wrote: "Have U seen the 3MK fixing today? that was an excellent concerted action FFT/LDN. Cheers."
Deutsche Bank's settlement dwarfs the previous $1.5bn record demanded in 2012 from Switzerland's UBS. Two former UBS traders have been criminally charged and its Japanese unit has pleaded guilty to US wire fraud charges.
Allegations that bank and brokerage staff attempted to rig rates such as Libor, the average rate at which banks say they can borrow from each other in different currencies, emerged during the credit crisis in 2008.
But it took another four years for the story to burst into the headlines after Barclays was first to be fined a then-record $450m over rate rigging and for deliberately understating rates during the 2007 and 2008 credit crunch.
Since then, a handful of top executives have lost their jobs over the scandal. Barclays' charismatic chief executive Bob Diamond was followed by John Hourican, former head of Royal Bank of Scotland's investment bank, in February 2013 over his bank's role in the scandal.
Eight months later, Rabobank's head Piet Moerland quit after the Dutch bank was fined $1bn.
European Union lawmakers gave their initial backing in March to a draft law introducing direct supervision of "systemically important benchmarks" such as Libor and currency indexes for the first time.
Britain, meanwhile, has introduced a law requiring Libor to be compiled by a third-party administrator that meets a host of requirements.
