It Just Cost Deutsche Bank $25,000 Per Employee To Keep Its Libor Manipulating Bankers Out Of Jail

Tyler Durden's picture

And so another historic scandal involving the manipulation and rigging of one of the most important global markets, that of Libor which is the reference security for several hundred trillion in derivatives, goes in the history books.

Moments ago the NY Department for Financial Services announced that Deutsche Bank would pay $2.5 billion "in connection with the manipulation of the benchmark interest rates, including the London Interbank Offered Bank ("LIBOR"), the Euro Interbank Offered Rate ("EURIBOR") and Euroyen Tokyo Interbank Offered Rate ("TIBOR") (collectively, "IBOR")."

According to FT calculations, "this is the largest fine to date in the sprawling worldwide Libor investigation" and beneficiaries of DB's criminal generosity include New York State Department of Financial Services (NYDFS) which will get $600 million, $775 million go to the U.S. Department of Justice (DOJ), and 227 million GBP (approximately $340 million) to the United Kingdom’s Financial Conduct Authority (FCA). Best of all $800 million will end up in the bank accounts oi the Commodities Futures Trading Commission (CFTC), the same CFTC which can now afford to upgrade from ticker tape and actually have some sense of the pervasive manipulation taking place in the S&P on a daily basis.

Most importantly for DB's 98,138 employees is that while DB will "terminate and ban individual employees who engaged in misconduct" nobody will go to jail. Again.

In other words it just cost DB's about $25,474 per employee to keep its Libor-manipulating employees (and thus, senior level management because the stench always goes to the very top) out of prison.

Considering it has cost JPMorgan $150,000 per employee to achieve the same result, here again we see that famous German efficiency in action.

 

 

So with the important stuff out of the way, we can proceed to the theatrics, of which the DFS statement is full to the brim.

* * *

NYDFS ANNOUNCES DEUTSCHE BANK TO PAY $2.5 BILLION, TERMINATE AND BAN INDIVIDUAL EMPLOYEES, INSTALL INDEPENDENT MONITOR FOR INTEREST RATE MANIPULATION

  • Widespread Effort by Bank Employees to Manipulate Benchmark Interest Rate Submissions for LIBOR, EURIBOR, TIBOR
  • Deutsche Bank Employee: This "is a corrupt fixing and DB is part of it!"
  • Deutsche Bank Employee Seeking to Obtain Lower Rate: "I’m begging u, don’t forget me… pleassssssssssssssseeeeeeeeee… I’m on my knees…"

Benjamin M. Lawsky, Superintendent of Financial Services, announced today that Deutsche Bank will pay $2.5 billion, terminate and ban individual employees who engaged in misconduct, and install an independent monitor for New York Banking Law violations in connection with the manipulation of the benchmark interest rates, including the London Interbank Offered Bank ("LIBOR"), the Euro Interbank Offered Rate ("EURIBOR") and Euroyen Tokyo Interbank Offered Rate ("TIBOR") (collectively, "IBOR").

The overall $2.5 billion penalty Deutsche Bank will pay includes $600 million to the New York State Department of Financial Services (NYDFS), $800 million to the Commodities Futures Trading Commission (CFTC), $775 million to the U.S. Department of Justice (DOJ), and 227 million GBP (approximately $340 million) to the United Kingdom’s Financial Conduct Authority (FCA).

Superintendent Lawsky said: "Deutsche Bank employees engaged in a widespread effort to manipulate benchmark interest rates for financial gain. While a number of the employees involved in misconduct have already left the bank, those that remain are being terminated or banned from the New York banking system. We must remember that markets do not just manipulate themselves: It takes deliberate wrongdoing by individuals."

The London Interbank Offered Rate ("LIBOR") is a benchmark interest rate used in financial markets around the world.  It is the primary benchmark for short term interest rates globally, written into standard derivative and loan documentation, used for a range of retail products, such as mortgages and student loans, and the basis for settlement of interest rate contracts on many of the world’s major futures and options exchanges.  It is also used as a barometer to measure the health of the banking system and as a gauge of market expectation for future central bank interest rates.

From approximately 2005 through 2009, certain Deutsche Bank traders frequently requested that certain submitters submit rate contributions that would benefit the traders’ trading positions, rather than the rates that complied with the IBOR definitions. For example, on February 21, 2005, a trader requested of another trader who performed submitter duties on a back-up basis, "can we have a high 6mth libor today pls gezzer?"  The trader/submitter agreed, "sure dude, where wld you like it mate ?"  The trader replied, "think it shud be 095?"  The trader/submitter replied, "cool, was going 9, so 9.5 it is."  The trader joked, "super – don’t get that level of flexibility when [the usual submitter] is in the chair fyg!" Similarly, on December 29, 2006, a trader wrote to a submitter, "Come on 32 on 1. Mth… Cu my frd."  The submitter agreed, "ok will try to give you a belated Christmas present…!"

Deutsche Bank also communicated and coordinated with employees of other banks and financial institutions regarding their respective rate contributions in advance of an IBOR submission. On September 7, 2006, a London desk head attempted to obtain a low EURIBOR submission from an external banker at Barclays, "I’m begging u, don’t forget me… pleassssssssssssssseeeeeeeeee… I’m on my knees…"  The external banker replied, "I told them 1 m up is that right?"  The London desk head continued, "please pal, insist as much as you can… my treasury is taking it to the sky… we have to counter balance it… I’m beggin u… can u beg the [a panel bank] guy as well?"   The external banker agreed, "ok, I’m telling him."

As a bank’s IBOR rates are intended to correspond to the cost at which the bank concludes it can borrow funds, the rates are an indicator of a bank’s financial health.  If a bank’s submission is high, it suggests that the bank is, or would, pay a high amount to borrow funds.  This could indicate a liquidity problem and, thus, that the bank is experiencing financial difficulty.

Traders and submitters at Deutsche Bank were aware that the IBOR rates did not accurately reflect their definitions.  On August 21, 2008, a vice president wrote to an external banker employed at Merrill Lynch, "tibor going down or not?"  The external banker replied, "tibor will go down slightly but not much… euroyen tibor isn’t really reflective of actual money market condition in japan… people just randomly make those numbers up… pretty much like libors tho!"

On July 16, 2009, a managing director and the Head of the London Money Market Derivatives desk discussed the strength and accuracy of the Euro LIBOR panel in comparison to the EURIBOR panel.  The managing director asked, "u think the quality of the euro-libor panel is 4.5bps better than euribor?"  The Head of the London Money Market Derivatives desk responded yes, and the managing director replied, "not so sure, i have a hard time to believe if so many banks say they can better than the market while they are a part of it."  The Head of the London Money Market Derivatives desk stated, "theyre all lying anyway."  The managing director replied, "there is a philosophical saying: ‘one greek says: "all greeks are lying" who do u trust?"

On September 4, 2009, a vice president wrote to a trader regarding LIBOR and TIBOR, stating, "am purring 34 for 3m libor and I think am far too high… JPM [JP Morgan Chase] is putting 41 for tibor… I do not understand how come we can have 3m tibor/cash at 56 at DB… DB is the among the lowest libor contribution in all ccys… UBS is corrup/manipulator in tibor fixing… i think putting such a high tibor damage the reputation of deutsche bank… Second, It is not because all the tibors setters are corrupt/manipulators that deutsche bank has to be aswell… It is not because the japanese banks are manipulating the tibor fixing that DB has to do it as well… Tibor is a corrupt fixing and DB is part of it!"

From approximately 2007 through 2009, a number of large international banks were receiving negative press coverage concerning their high and potentially inaccurate LIBOR submissions.  Certain articles questioned particular banks’ liquidity position regarding the high LIBOR submissions and, as a result, the banks’ share prices fell.  Various Deutsche Bank senior managers circulated and discussed these articles.

On October 4, 2007, the Head of Short Term Interest Rate Trading in Australia and New Zealand forwarded an article, which reported a rumor that a large European bank was struggling for financing, including to senior management, commenting on the instability of the market, specifically in regards to bank illiquidity, and commented, "This market has the feel that we are about to have another run and panic on funding in my opinion just a gut feeling looking at the behavior of LIBORS if we look at the 3mth fix over the lst few days since we have gone over the TURN of the year there has been a bit of pressure… this feels like the period where we were edging up ever so slight back in early august where we fixed at 5.36 for months on end and then started edging up before the panic set in." Later that day, a group head within the Global Finance and Foreign Exchange Unit forwarded the email to  a London desk head, directing, "Make sure our libors are on the low side for all ccys."

Terminations and Bans of Individual Deutsche Bank Employees

As a result of the investigation, numerous employees that were involved in the wrongful conduct discussed in this Order, including those in management positions, have been terminated, disciplined or are otherwise no longer employed by the Bank, as a result of their misconduct.

However, certain employees involved in the wrongful conduct remain employed at the Bank.  The Department orders the Bank to take all steps necessary to terminate seven employees, who played a role in the misconduct but who remain employed by the Bank: one London-based Managing Director, four London-based Directors, one London-based Vice President, and one Frankfurt-based Vice President.

Additionally, ten of the individuals centrally involved in the misconduct were previously terminated as a result of the investigation.  Four of these employees were reinstated pursuant to a German Labour Court determination, and two of them remain at the Bank. Those employees that were reinstated due to the German Labour Court decision who remain at the Bank shall not be allowed to hold or assume any duties, responsibilities, or activities involving compliance, IBOR submissions, or any matter relating to U.S. or U.S. Dollar operations.

Superintendent Lawsky thanks the U.S. Department of Justice, the Commodities Futures Trading Commission, and the U.K. Financial Conduct Authority for their work and cooperation in this investigation.

To view a copy of the NYDFS order regarding Deutsche Bank, please visit, link.


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GMadScientist's picture

Mazeltov! Another wrist slapped in the name of "justice".

El Oregonian's picture

Crime pays, baby! at least it does for the 1% anyway...

 

sarc off//

it is sad really...

RaceToTheBottom's picture

The Banks pay nothing.  The Banks customers get the fine passed to them, but due to the lower values of the fines, and the higher return for breaking the law, this is just a cost of doing business.

The ROI for breaking the law is still positive.  Until that changes, it is still profitable to break the law.

usednabused's picture

What does he mean that stench goes to the top? It fucking STARTS at the top

chubbar's picture

About  the only scenario I can think of that explains this and all the other lack of criminal prosecution for what is blatantly obvious criminal misconduct is that it is all part of the same coverup. Is it possible that all the banks and their execs have a "get out of jail free" card issued by the ESF/Justice dept so that these banks can be utilized to carryout gov't mandates to manipulate every fucking index there is that matters? Full Spectrum financial dominance? Nothing other than that really makes sense. Not all of these execs are connected enough to pull multi-billion dollar scams and remain untouched.

LawsofPhysics's picture

Correct, banks have not been "banks" for quite a while.  There is no real risk for these useless paper pushers anymore.  They own governments and can bail themselves out anytime they need to.

tick tock motherfuckers...

junction's picture

Once again, Cuomo's New York State crime family gets a cut of the protection money paid by a big financial institution.  More crime family news: The Wall Street Journal reports that a drone attack in Pakistan killed two hostages, one an American.  Since the killings were inadvertant, according to Obama, no problem about violating U.S. law on murdering Americans.  Trust Obama, this mythical President always tells the truth.  Just ask Aaron Swartz, Paul Walker and Michael Hastings, all dead under mysterious and uninvestigated circumstances. For example, Hastings' Mercedes Benz tapped into a tree, blew up and the engine flew some 40 feet in the air.  Unheard of, unless at least 10 kilos were planted under the engine and transaxle.  No one at the corrupt LAPD checked for explosive residue in the Hastings or Walker murders, S.O.P. when the police there suspect one of their cops is involved in a murder.

---

A U.S. drone strike in January targeting a suspected al Qaeda compound in Pakistan inadvertently killed an American and Italian being held hostage by the group, senior Obama administration officials said.

The killing of American development expert Warren Weinstein and Italian aid worker Giovanni Lo Porto is the first known instance in which the U.S. has accidentally killed a hostage in a drone strike.

In addition to the hostages, U.S. intelligence agencies believe American-born al Qaeda spokesman Adam Gadahn was killed in January in separate incident. U.S. intelligence analysts believe he was likely killed in a CIA drone strike that took place after the one that killed Messrs. Weinstein and Lo Porto.

Along with Messrs. Weinstein and Lo Porto, the strike on the compound killed al Qaeda leader, Ahmed Farouq, another American citizen, the officials said. The CIA had observed what they believed to be a senior al Qaeda member entering the compound in the days just before the strike but intelligence analysts didn’t know that it was Mr. Farouq, the officials said.

Similarly, the CIA didn’t know that Mr. Gadahn was at the compound that it bombed later in the month.

The White House normally would need to seek special legal clearances to directly target American citizens suspected of plotting attacks against the U.S. That process didn’t apply in these cases because Messrs. Farouq and Gadahn weren’t being directly targeted in the operations, officials said.

Mr. Gadahn has long been seen as an important al Qaeda propagandist and was indicted during the Bush administration on charges of treason and material support for terrorism.

 

LawsofPhysics's picture

LOL!  That's it? 

"Full faith and credit"

tick tock motherfuckers...

VinceFostersGhost's picture

 

 

I only hope if that happens to me, my company will hold a bake sale to bail my ass out.

Atomizer's picture

They will flock if you sell marijuana baked brownies. 

/ what a sick world we live in. 

venturen's picture

credit maybe....faith...LOL!!!

asteroids's picture

No problem, DB just "prints up" $150k/employee in credit and lends it out to some schmuk. Therefore, it didn't cost DB anything.

LawsofPhysics's picture

Correct, in fact, using the current mark to fantasy accounting methods, more debt is actually revenue positive!!

 

Alex DeLarge's picture

Thank God in Himmel they got the flash crash guy! 

williambanzai7's picture

What, no extradited Indians?

BeaverCream's picture

Proles get speeding tickets and banks get fined, it's just two different levels of piracy.  Not that I'm shedding any tears for a bank.  A citizen getting a speeding ticket is much worse.

fockewulf190's picture

Ist doch alles scheiße.

101 years and counting's picture

so, who do we write to to get our share of the 2.5B settlement?  afterall, this is our money DB effectively stole via market rigging.

raeb's picture

ROFLMAO.  Good luck with that.

wstrub's picture

What about the fines for Commodity manipulation??????

VinceFostersGhost's picture

 

 

Could probably do it now, since we're not spending all that money on hair care products anymore.

MFL8240's picture

This is become more and more disgraceful as the days go on.  No differnt than Corizine!

Brazen Heist's picture

Was it these guys who suddenly "closed" down their commodity trading team after revelations of rigging?

I wonder why.

NoWayJose's picture

Just take the $25K per employee out of the $1.2 million per employee profit they made from the manipulation. This won't end until the fines exceed the profits, or people go to jail.

Max Cynical's picture

"This won't end until the fines exceed the profits, or people go to jail."

Let's be realistic...this won't end.

Atomizer's picture

Inebriate the accessories to the crime. 

Toolshed's picture

Since it has been proven now that banks summon money into existence out of thin air when they make loans, won't DB be able to make themselves a loan and basically come out ahead after they deduct the fine from their taxes as a cost of doing business?

Atomizer's picture

Good question. I think it depends if they fall under Basel III accord banking reform. Can't check. Mrs Atomizer is getting pissed off. Have to serve her needs. Look into it. 

Hubbs's picture

Wait a minute. Who actually winds up paying for these fines? The shareholders? Obviously the fines are not deducted from the perps' paychecks!

venturen's picture

what is the aveage bonuses...about $250k?

VinceFostersGhost's picture

 

 

Yeah, chump change.

 

We can do this crap all day long.

Pascal1967's picture

It didn't cost the bank a damn dime.

They will just pass the cost on to their clients.

So, WE are paying money to the government to keep the theiving bankers out of jail.

Downtoolong's picture

..beneficiaries of DB's criminal generosity include New York State Department of Financial Services (NYDFS) which will get $600 million, $775 million go to the U.S. Department of Justice (DOJ), and 227 million GBP (approximately $340 million) to the United Kingdom’s Financial Conduct Authority (FCA). Best of all $800 million will end up in the bank accounts oi the Commodities Futures Trading Commission (CFTC).

And the benefits DB received from Libor manipulation were many multiples of all this. And the 196th CFTC Hearing on Commodity Position Limits will probably be held in Vail this year.

So you see, it’s not really about effective regulation at all. It’s about getting the banks to pay for regulators operating costs and job security so that they can continue regulating banks precisely how they want to be regulated.

Of course no one goes to jail, if they did they might stop breaking the rules, and then no one could collect any fines.

spanish inquisition's picture

Sweet. So when should I expect my check for overpaying interest my whole life?

falak pema's picture

What works for Corzine and Deutsche doesn't work for a super trader who fooled the market from his mother's sofa in a one man operation that makes the world's largest mercantile/commodity exchange look like Disneyland for people on a roller coaster ride.

What happens in Ferguson also happens on the Internet; we need "fall guys" to show the world we the minions of TBTF mean business and uphold "law and order"...except for the little guy.

City_Of_Champyinz's picture

Fucking Deutschebags.

BullyBearish's picture

All this says is that they were doing it for their bosses, the same bosses that keep them out of jail and print extra money to pay the fines...

JBilyj's picture

Simple, just make it illegal to write off penalty fees like this one under the guise of "cost of doing business". When these companies have to start eating fines like this at the bottom line, it will become more and more expensive and perhaps cost prohibitive to do illegal actions like this.

Grinder74's picture

Sooo....

They pay a total fine of about 7.4% of their revenue, and the people involved can probably stayed employed, just not work on "U.S. or U.S. Dollar" operations?

But hey, if it's an individual the government goes after, then by all means hit 'em with a penalty of over 70% of their annual income, drive them into bankruptcy, and permanently bar them (despite never proving a single allegation)!

vegas's picture

Really good news for you "apparatchiks" at the CFTC; with the stealing of 800 million you now get updated and paid porn accounts with live chat and messaging. Other than that WTF else do you do all day?

 

www.traderzoo.mobi

J J Pettigrew's picture

Fines Fines?  Where does the money go?

And so they rob the bank....and are forced to put "some" back...

and the fine money goes to the payouts of the enforcers?  Really?

Max Cynical's picture

I'm certain the high fives are flying around DB's HQ today...champagne is flowing no doubt.

Mike Honcho's picture

Sending emails to manipulate millions with the pizzaz of a teen on Snapchat.  You stay classy, DB.

DontFollowMyAdviceImaDummy's picture

SEE THERE IS NO INFLATION! "Get Out Of Jail Free" cards HAVE DROPPED IN PRICE from $150,000 to $25,000!!!

Iam Yue2's picture

Not bad, when one considers that the French government allegedly paid ISIS 8m Euros per hostage.

Joebloinvestor's picture

Sorry for the dp.

 

Joebloinvestor's picture

Hey, the Greeks let the old financial minister off with a fucking wrist slap and he was facing 30 years!

 

gcjohns1971's picture

Don't cry for DB.

Draghi will print them 2.5 Billion Euros.  DB will not lose a single dime.

That's the kidd-glove treatment you get when you are one of the owners of the Federal Reserve.