U.S. and British regulators fined Deutsche Bank $2.5 billion and its British subsidiary plead guilty to criminal wire fraud on Thursday as it became the eighth financial group to settle allegations of rigging interest rate benchmarks.
The record penalty 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 more than $8.5 billion. Twenty-one traders and brokers face criminal charges.
U.S. regulators fined Germany's largest bank $2.175 billion and British watchdogs imposed a £227 million ($341 million) penalty for its role in a scam to manipulate the London Interbank Offered Rate (Libor) and its Euribor cousin - together benchmarks for hundreds of trillions of dollars of financial products and loans worldwide.
Britain's Financial Conduct Authority (FCA) said the misconduct involved at least 29 Deutsche Bank individuals including managers, traders and submitters based mainly in London but also in Frankfurt, Tokyo and New York.
It accused Deutsche Bank of inadequate systems and controls, failing to provide timely, accurate information and misleading the UK watchdog by claiming its German regulator BaFin had prevented it from sharing a report, when this was untrue.
The New York State Department of Financial Services regulator said the German lender would from now dismiss and ban employees who engaged in misconduct and install an independent monitor.
"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, acting director of enforcement and market oversight at the British regulator.
"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."
Deutsche Bank's settlement dwarfs the previous $1.5 billion record demanded in 2012 from Switzerland's UBS. Two former UBS traders have been criminally charged and its Japanese unit has pleaded guilty to U.S. wire fraud charges.
Allegations that bank and brokerage staff attempted to rig Libor, the rate at which banks say they can borrow from each other, first emerged during the credit crisis in 2008.
But it took another four years for the story to hit the headlines after Britain's Barclays was first to be fined a then-record $450 million over its traders' attempts to rig Libor and Euribor, and for deliberately understating rates during the 2007/08 credit crunch.