Germany's biggest bank, Deutsche Bank, has become the latest global
financial giant to be fined for rigging a key interest rate known as the LIBOR.
Deutsche will pay a record US$2.5 billion to settle investigations into
dodgy practices where it manipulated the benchmark rate for its own profit.
The bank has been slammed for "cultural failings" almost
seven years after the Wall Street collapse was triggered by greed and bad
banking behaviour.
LIBOR is the London Interbank Offered Rate and an average rate set
daily to determine how banks borrow and lend between each other.
It is used to price hundreds of trillions of dollars of financial
transactions around the world and a higher or lower rate can mean millions in
big business deals.
The impact of LIBOR goes unseen by most people even though it can flow
into mortgage rates, car loans, personal loans and credit card rates.
Deutsche's US$2.5 billion fine from US and British regulators comes as
banks around the world - including Australia - are being scrutinised more than
ever for alleged unlawful and unethical practices.
The settlement dwarfs fines paid by Barclays and UBS which paid $US500
million and $US1.5 billion respectively.
While the fine is less than what Deutsche Banks makes in a year it is
around what it makes in a quarter.
But in the case of Deutsche the evidence has been damning and that
appears to have ramped the the severity of the fine.
One request, now public, highlights the deals done on LIBOR with a
Deutsche trader pleading with Barclays for a lower quote saying: "I'm
begging you, don't forget me .. I'm on my knees."
Deutsche's image has not been helped by the accidental destruction of
around 482 tapes of telephone calls of LIBOR transactions.
Martin Arnold, the banking editor at the Financial Times, says Deutsche
sent the impression it had something to hide.
"It's pretty damaging and what stands out in this case is some of
the language by particularly the UK's Financial Conduct Authority which is very
critical of how the banks has behaved during this investigation and been very
resistant to cooperating," Mr Arnold told the BBC.
"And it says misled the regulator at several points and even says
that the bank destroyed some evidence that the regulator had requested it
preserve. So there's a lot of criticism there and this doesn't reflect well on
Deutsche Bank's leadership."
The US Justice Department says investigations are far from over and
that a range of other banks and individuals are being quizzed about the LIBOR
scam.
So far total fines are approaching $US9 billion but analysts say that's
tiny compared to what banks could make through LIBOR fixing.
To date there has been no evidence that any Australian bank has been
involved in LIBOR rigging although their reputations have been tainted by
association.
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