Nothing To See Here: German Regulator Decides Deutsche Bank CEO Didn't Know About LIBOR After All

A little over a week ago in "Deutsche Bank Stunner: An Inside Look At Former CEO’s Role In Liborgate," we presented lengthy passages from a report sent to the bank by BaFin, Germany's financial "watchdog". 

The document contains voluminous evidence which suggests that not only did Anshu Jain (who stepped down last month), know full well that his traders and submitters were likely involved in manipulating LIBOR fixes, but it was in fact Jain who "reorganized the seating order in the trading division in London in the year 2005, which resulted in traders and submitters sitting together, [in order] to achieve an open communication between both functions, especially also with regard to the LIBOR."

The report goes on to describe the relationship between Jain and Christian Bittar, the bank’s rate rigger par excellence, who the former CEO described as one of "the best people we’ve got."

As bad as all of this is, the particularly egregious - according to BaFin anyway - part of the review revolves around statements Jain made to The Bundesbank. In short, BaFin suggested that Jain may have lied about when he first discovered that LIBOR was being manipulated. In fact, according to what Jain told the central bank, Zero Hedge knew about LIBOR rigging two years before he did even though he himself made the seating chart which placed traders next to submitters! 

From BaFin:

There is suspicion that Mr. Jain might have knowingly made incorrect statements in his IBOR related Interview with the Deutsche Bundesbank on 5 October 2012. Mr Jain stated in this interview that he started having doubts about the fixing of the LIBOR for the first time in the first quarter of 2011 and that, in 2008, he had no knowledge about the LIBDR discussions.

Yes, "there is suspicion." That suspicion stems from this:

Mr. Jain had been informed already in 2008 about the discussions in the market relating to the susceptibility of the LIBOR to manipulation.


Mr. Falssola reported to Mr. Jain for the first time, according to the information available to EY about LIBOR submissions which deviated from the market by e-mall dated 21 August 2007.


In an e-mail dated 7 March 2008, Mr. Nicholls informed Mr. Jain, Mr. Cloete and Mr. Falssola that the Interbank markets were moving in a divergent direction and that there were banks which were trying to obtain liquidity for up to 50 basis points above the reference interest rate they had determined. The necessary conclusion based on this Information was that banks had reported reference rates which were too low.


An article appeared In the Wall Street Journal ("Bankers cast doubt on key rate amid crisis”) on 16 April 2008. In which there was a report about the concerns of market participants with regard to the reliability of the this involved and in one paragraph also the possibility of transmitting false Interest rates in order to profit from derivative transactions as well as the possibility of collusion among banks.


This was followed by e-maii communications concerning this WSJ article between Mr. Boaz Weinstein and Mr. Alan Cloete; Mr. Cloete stated that the LIBOR no longer represented a realistic ratio.


The discussion about the calculation of the LIBOR that made the rounds in the market following the WSJ article was the subject of two e-mails from Mr. Cloete to Mr. Jain on 20 April 2008 and 15 May 2008: Mr. Cloete referred in his e-malls to the rumors about the LIBOR noise about how libor noise around the LIBOR

This shows that Mr. Jain was informed about the LIBOR discussion in the market in the first half of the year 2008.


Mr. Jain has been proven to have learned about discussion in the market concerning the susceptibility of the LIBOR to manipulation in 2008.

So basically, Anshu Jain was personally responsible for a seating arrangement reorganization in 2005 which moved traders and submitters next to each other, was told that LIBOR submissions deviated from the market in a documented e-mail from 2007, and discussed a Wall Street Journal article about LIBOR with colleagues over e-mail in 2008. 

This led BaFin to conclude that "Mr. Jain has been proven to have learned” about LIBOR manipulation in 2008 despite the fact that Jain told the Bundesbank he had "no knowledge" of such things until at least 2011. 

Now BaFin says they were just kidding.

We present the following from Bloomberg with no further comment because frankly, given the above, there’s nothing left to say here:

German banking regulator Bafin cleared former Deutsche Bank AG co-Chief Executive Officer Anshu Jain of misleading the Bundesbank about his knowledge of the company’s role in attempts to manipulate benchmark interest rates.


"The suspicion that you made knowingly incorrect statements to a regulator seems unsubstantiated to me," Felix Hufeld, the president of Bonn-based Bafin, wrote in a letter to Jain seen by Bloomberg. "This aspect will therefore no longer be relevant in the continued assessment by Bafin."