Bank fined £1.6bn for rate-rigging

Deutsche Bank headquarters

A leading City bank is to pay a record £1.6 billion fine as part of a settlement with US and UK regulators over the rigging of interest rates.

Deutsche Bank's fine from the UK's Financial Conduct Authority (FCA) amounted to a record £227 million after the watchdog found traders manipulated rate submissions between January 2005 and December 2010. The FCA also accused the lender of repeatedly misleading it.

Other fines from authorities in the United States included 800 million US dollars (£532 million) from the Commodities Futures Trading Commission.

Georgina Philippou, the FCA's acting director of enforcement and market oversight, said: "This case stands out for the seriousness and duration of the breaches by Deutsche Bank - something reflected in the size of today's fine.

"One division at Deutsche Bank had a culture of generating profits without proper regard to the integrity of the market. This wasn't limited to a few individuals but, on certain desks, it appeared deeply ingrained."

The manipulation involved at least 29 Deutsche Bank staff and was primarily based in London but also Frankfurt, Tokyo and New York.

The FCA said their behaviour went unchecked because of inadequate systems and controls, with the Bank taking more than two years to identify and produce all the relevant audio recordings it had requested.

Deutsche Bank tried to claim to the FCA that its systems had been adequate, even though the person making this statement knew it to be false.

Ms Philippou added: "Deutsche Bank's failings were compounded by them repeatedly misleading us. The bank took far too long to produce vital documents and it moved far too slowly to fix relevant systems and controls.

"This case shows how seriously we view a failure to cooperate with our investigations and our determination to take action against firms where we see wrongdoing."

Other fines by the City watchdog in relation to the fixing of Libor and Euribor rates saw Barclays and UBS pay £59.5 million and £160 million respectively. Royal Bank of Scotland was hit with a fine of £87.5 million in relation to Libor misconduct.

The FCA said the involvement of managers and senior managers in the misconduct "aggravates the seriousness of the breaches".

Most of it took place in London while it also extended to trading desks in Frankfurt, Tokyo and New York.

The probe found that on some occasions staff submitting Libor rates would solicit requests on the numbers to put in from derivatives traders who stood to profit.

On one occasion, a manager in September 2005 wrote to a derivatives trader "libors any requests" to which the trader replied: "HIGH FREES [THREES], LOW 1MUNF [MONTH]".

Another trader in April 2005 requested "COULD WE PLS HAVE A LOW 6MTH FIX TODAY OLD BEAN?".

On another occasion in December , a manager said: "COULD I BEG YOU FOR A LOW 3M [EURIBOR] FIXING TODAY.. THAT WOULD BE THE BEST XMAS PRESENT ;)".

In August 2010, a submitter asked to put in a lower Libor rate was told by a colleague: "We're going to get in trouble if we keep moving it up and down".

In January 2011, a compliance officer at Deutsche signed a confirmation to the British Bankers' Association (BBA) that the bank's Libor submissions had been audited, but this was false, the FCA found.

In a later email, the same member of staff described the BBA confirmation as an "an a**e-covering exercise".

Deutsche Bank was found by the FCA to have failed to pass on to it a report from the German regulator on the rate-rigging and claimed that it was banned from doing so even though "there was no such prohibition".

In addition, it formally attested to the FCA that its systems and controls related to Libor submissions were adequate, even though the person drafting this assertion knew it to be false.

Deutsche Bank's response to some of the regulator's enquiries had been "slow and ineffective" and prolonged the length of the probe.

It found inadequacies in Deutsche's audio system for recording traders' telephone calls meant the bank took more than two years to identify and produce all those first requested by the FCA in December 2012.

The FCA said the bank "has stated publicly that it promotes a culture of integrity" but that due to the failings it would continue to monitor efforts to change its culture.

Jurgen Fitschen and Anshu Jain, co-chief executive officers of Deutsche Bank, said: "We deeply regret this matter but are pleased to have resolved it. The bank accepts the findings of the regulators.

"We have disciplined or dismissed individuals involved in the trader misconduct; have substantially strengthened our control teams, procedures and record-keeping; and are conducting a thorough review of the Bank's actions in addressing this matter.

"This agreement marks another step in addressing the past and ensuring that the Bank earns back the trust of its clients, shareholders and society at large."

Deutsche said no current or former member of its management board was found to have been involved in or aware of the traders' misconduct.

It said it had worked "intensively" investigating the matter, with an internal inquiry involving the collection of more than 150 million electronic documents and 850,000 audio files.

The Bank said it recognised there were "defects and delays in collecting and producing documents and audio".

Today's fines come months after a blunt video message from Deutsche's markets division chief Colin Fan, warning employees that their emails, conversations and conduct would all be subject to scrutiny.

In the message last May, Mr Fan said: "You may not realise it but right now, because of regulatory scrutiny all your communications may be reviewed.

"Communications that run even a small risk of being seen as unprofessional stops right now. I need you to exercise good sense and sound judgment.

"Think carefully about what you say and how you say it. If not, it will have serious consequences for you personally."

10 things your bank doesn't want you to know
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Bank fined £1.6bn for rate-rigging
Once you have opened a current account with a bank or other lender, you will get a steady flow of emails, letters (and maybe phone calls) offering you a savings account, loan, mortgage, ISA etc to go with it. But while it may be tempting to have everything in one place, it's better to do the legwork and shop around for the best financial products. You can compare interest rates on loans and savings accounts in the 'best buy' tables in the newspapers, or look online on comparison sites. Remember you can still easily transfer your money between accounts, even if they are not with the same financial institution. 
Whether you want to apply for a new mortgage or refinance an existing one, your bank will probably be very happy to give you an instant quote in the hope that you will go with them. They may not tell you that you can shop around at other lenders. A mortgage broker can give you an overview of the best interest rates on offer, and might be able to cut you an even better deal him/herself. 

Want to cash in your jars of change that are sitting on your shelves at home? Many banks are not very keen on coins. They often only take it from their own customers. You will have to sort it into different denominations and put the coins in the bank's bags in set amounts (for example, £1 for coppers, £5 for silver, etc). Some banks only take a limited number of bags a day, or won't take any at busy times. Others take a different view: HSBC has free coin deposit machines in many larger branches where you pour your jar of coins into the machine and it counts them and automatically credits your account. Barclays, NatWest and RBS also have machines in large branches in city centres.

Bank employees now have a duty to point out that they only advise on the bank's products and don't offer independent financial advice. What they won't tell you is that even the advice they give you about the bank's own products should be treated cautiously. Bank staff are often undertrained, underpaid and overworked. (You could ask for the employee's qualifications before getting advice.) So do your own research and/or find an independent financial adviser.

Nothing is set in stone. Your bank won't tell you this, but sometimes it will waive a fee, for example an overdraft or an ATM fee, depending on the circumstances. You have nothing to lose by asking, if you can argue persuasively why they should waive the fee. Citizens Advice says your bank should treat you sympathetically if you can show financial hardship.

As stated in the previous slide, some things are negotiable – such as interest rates or waiving fees – if you can make a good case for it. In that instance, talking to an employee in person is better than filling in a form online.

If your account is overdrawn and you get paid, your bank could use this money to pay off your overdraft without your permission. However, you have a right to ask them not to do this so you can pay your rent or mortgage first. This is called first right of appropriation. You have to ask your bank in writing, and you'll need to write to them with new instructions every time money gets paid into your account. Make sure you write 'first right of appropriation' in your letter.

If money is mistakenly credited to your account, your bank or building society can recover the money, assuming they do this within a reasonable time. But you may be allowed to keep the money, for example if you didn't realise the bank had made a mistake and spent the money in good faith. You would have to prove that you spent it in such a way that it would be unfair to ask you to pay it back. You can complain to the Financial Ombudsman if you think your lender is being unfair in asking you to repay the money.

If you do have to pay it back, you could try to reach an agreement with your bank to pay it back in instalments without interest being added.

The Financial Ombudsman Service has more advice on what happens when payments have been credited to the wrong account. If you did something wrong - for example, by entering the wrong account number - rather than the bank, the Financial Ombudsman may still uphold your complaint. They consider whether the financial institution made it clear to the consumer that only the bank sort code and account number are used to process the payment, rather than the name of the payee. They will also ask whether the lender should have realised that the consumer had made mistake, and once the problem came to light, did the firm take reasonable steps to try to get the money back from the recipient.

If too much is deducted from your account, your lender may have to refund the full amount of the payment. For example, if the money is taken through a direct debit or credit card payment for a hotel room or car rental. When deciding whether the debit was reasonable, the bank or building society will take into account your previous spending pattern. But the bank doesn't have to refund the payment if you agreed the amount beforehand or were informed of the payment by your lender at least four weeks before.

If you don't have enough money in your account to cover a direct debit payment, your bank may not make the payment. It doesn't have to tell you that the payment hasn't been made, so the onus is on you to keep checking your account. If, on the other hand, the payment goes through, you may be charged for an unauthorised overdraft.


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