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Deutsche Bank to Pay $2.5 Billion Fine to Settle Rate-Rigging Case
By JACK EWINGAPRIL 23, 2015

FRANKFURT — Deutsche Bank will pay a $2.5 billion penalty to United States and British authorities to settle accusations that it helped manipulate the benchmarks used to set interest rates on trillions of dollars in mortgages, student loans, credit cards and other debt, American and British officials said on Thursday.

The penalty is by far the largest in a yearslong investigation into whether large banks conspired to set the price of debt in ways that would be profitable for them. Until Thursday, the largest fine was the $1.5 billion the Swiss bank UBS agreed to pay in 2012.

The fixing of interest rates by Deutsche Bank employees in London and Frankfurt from 2005 to 2009 was deliberate and the employees were aware that it was wrong, said Benjamin M. Lawsky, the New York State superintendent of financial services.

“Deutsche Bank employees engaged in a widespread effort to manipulate benchmark interest rates for financial gain,” Mr. Lawsky said in a statement on Thursday.

“Markets do not just manipulate themselves,” he added. “It takes deliberate wrongdoing by individuals.”

As part of the settlement, one of Deutsche Bank’s British subsidiaries will plead guilty to fraud, and the company will be required to install an independent monitor whose job will be to ensure that the bank complies with New York laws. The authorities also ordered the bank to fire seven managers, all but one of them in London, who were found to have been involved in the wrongdoing. They were among more than two dozen employees believed to have taken part, most of whom have already left the bank.

The settlement is likely to be greeted with mixed feelings at Deutsche Bank headquarters in Frankfurt. It resolves a legal issue that had weighed heavily on the reputation of the bank, Germany’s largest financial institution, and it removes uncertainty about the financial impact of the investigation. On Wednesday, Deutsche Bank set it had set aside an additional 1.5 billion euros, or about $1.6 billion, for the penalty, but it said it still expected to be profitable in the quarter.

The size of the fine is an embarrassment, however, for a bank that has been struggling to maintain its status on Wall Street, where it is one of the last European banks with a major presence. And Deutsche Bank faces other legal troubles, including investigations into possible currency manipulation and violations of United States sanctions against countries like Iran.

It is unclear whether the authorities will pursue additional settlements after resolution of the Deutsche Bank case. Three American banks that have come under scrutiny in the investigation of rigged interest rates — JPMorgan Chase, Citigroup and Bank of America — might face actions from regulators. But the breadth of the wrongdoing at those banks may not give rise to criminal cases.

The interest rate benchmarks manipulated by Deutsche Bank traders included the London Interbank Offered Rate, or Libor; the Euro Interbank Offered Rate, or Euribor; and the Euroyen Tokyo Interbank Offered Rate, or Tibor, the authorities said. The benchmarks are averages of how much banks say they would pay to borrow from one another, and depend on information provided by participating lenders.

Ben Protess and Jessica Silver-Greenberg contributed reporting from New York

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