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Setting the benchmark in corporate integrity

Deutsche ordered to improve internal controls

Imminent order by German regulator is likely to lead to Deutsche Bank reaching a settlement over Libor scandal

Germany’s leading bank is set to be forced to improve its internal controls by the country’s regulator BaFin, after it became embroiled in the Libor rate fixing scandal.

Deutsche Bank was named by UK prosecutors in documents submitted in court in the case against the Libor rate fixing scandal that emerged last year. BaFin want the bank to improve the way it operates, with a particular focus on ensuring that traders cannot set rates without necessary supervision. However, the scope of the regulators powers is small, and so no fines will come from within Germany.

UK and US regulators, however, are likely to demand a considerable settlement from the bank for its role in the scandal, and BaFin’s report is likely to speed up that process. Deutsche Bank is reported to have already set aside around €500m to pay for any fines it may incur.

When contacted, the bank has been unavailable to comment on the reports. However, in a statement from when it was named in the investigation, it said that no senior executives were implicated, laying the blame at junior members of staff: “As per the current status of investigations, we can say that no current or former member of the Management Board had any inappropriate involvement in the interbank offered rates matters under review.
“It also has found that certain employees, acting on their own initiative, engaged in conduct that falls short of the Bank’s standards, and action has been taken accordingly.”

The Libor scandal engulfed a series of UK based banks, including Barclays and the Royal Bank of Scotland, as well as Switzerland’s UBS. Estimates of the scandal show that US states and local governments lost around $6bn due to fraudulent interest payments.

Barclays was fined $200m by the Commodity Futures Trading Commission in the US, as ell as $160m by the US Department of Justice. Domestically, it was fined £59.5m by the Financial Services Authority (now the Financial Conduct Authority). A decision on the settlement for Deutsche Bank is expected in the coming weeks.

 

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