LONDON/NEW YORK - US and British authorities fined Deutsche Bank US$2.5 billion, accused Germany's largest lender of obstructing regulators and ordered it to fire seven employees in the eighth global settlement of alleged benchmark interest rate rigging.
The penalty - the biggest in a seven-year investigation that has shredded the banking industry's reputation - takes the total fines imposed on some of the world's top financial institutions to around $8.5 billion. Twenty-one people face criminal charges.
Slamming Germany's largest lender for "cultural failings", regulators squarely blamed senior staff for misleading them, failing to be open and cooperative, and prolonging the investigation.
US regulators fined Deutsche Bank $2.12 billion and UK watchdogs imposed a $340 million penalty for its role in a scam that ran from around 2003 to 2010 to fix rates such as the London Interbank Offered Rate (Libor) - used to price hundreds of trillions of dollars of loans and contracts worldwide.
As part of the settlement, Deutsche Bank's London-based subsidiary pleaded guilty to criminal wire fraud and the parent group entered into a deferred prosecution agreement to settle US wire fraud and antitrust charges. US authorities said independent monitors would be installed.
STAFF UNDER FIRE
New York's banking regulator 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.
Britain's Financial Conduct Authority (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 wrongly 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 also 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..."
US and UK authorities published pages of traders' requests for rate changes. In one, a Deutsche London desk head tried 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 $1.5 billion record demanded in 2012 from Switzerland's UBS (UBSG.VX). 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 $450 million over rate rigging and for deliberately understating rates during the 2007/08 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 (RBS.L) investment bank, in Feb. 2013 over his bank's role in the scandal. Eight months later, Rabobank's head Piet Moerland quit after the Dutch bank was fined $1 billion.
European Union lawmakers gave their initial backing in March to a draft EU law that will introduce 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, with convicted riggers facing seven years in jail.
Britain's FCA said in 2012 it expected to reach eight transatlantic settlements with financial institutions over the rate-rigging allegations. However, the regulator said on Thursday its investigation was on-going.