n-tv (08.07.2012) The British interest rate scandal concerning allegedly flawed Libor rates keeps building up pressure on the Deutsche Bank: In the US investors – also German ones – take the financial institution to court because of a possible involvement. So far, the Deutsche Bank has been tight-lipped. First staff members, however, have already lost their jobs.
Deutsche Bank 27,28
In the scandal on manipulating interest rates in Europe, the Deutsche Bank is now officially taken under scrutiny. Due to the alleged participation of European banks in the deception of the Libor rates, investors now confront the German leading banking institution with legal proceedings. With an investment company owned by the Metzler Bank, also a German financial institution was involved in several class actions against the Deutsche Bank in New York.
“This is what is currently been done by many investment companies”, says a spokesman of Metzler and thus confirmed a respective report of the German newspaper “Spiegel”. According to the magazine, the Deutsche Bank has been investigating for months whether its traders are involved in the manipulations. Two associates have already been suspended.
The investment company of the Metzler Bank manages public and special bonds. The participation in the law suit is a normal procedure. “We are bound to pursue the issue legally, because we have a fiduciary responsibility towards our investors”, said the spokesman.
A spokesperson of the Deutsche Bank refused to give a statement and merely referred to the recent quarterly report. It says that the bank was urged to disclose information “in light of the quotation of interest rates for different currencies in the inter-bank market” between 2005 and 2011 by several departments in the US and Europe. It is further stated that the bank is cooperating with these departments in this respect.
Two persons familiar with the issue reported on Friday that the largest German financial institution became subject to a special investigation procedure of the German financial supervisory body BaFin. The procedure aims at elucidating the bank’s involvement in the scandal on the quotation of Libor market interest rates. It is not a routine examination.
The interest rate Libor is calculated once a day in London and indicates the conditions for inter-bank lending. It is based on individual data of the big banks and serves as a reference for credits to companies, the private sector and other financial operations amounting up to a total volume of 360 trillion dollar.
The banks are accused of having manipulated Libor between 2005 and 2009 by employing wrong numbers in order to cover their true refinancing costs and pocket trade profits. At the same time the departments investigate possible manipulations of a second market interest rate which is particularly popular in Europe, Euribor. Here, German banks play a much bigger role in international trade. The examinations, however, are not as elaborated as the ones on Libor.
The entire top management of the British bank Barclays has stumbled over the Libor-scandal, CEO Bob Diamond was the most recent manager to step down. The investment bank has to pay a lump sum of half a billion dollars for its misconduct. However, in a parliamentary hearing Diamond implied that more banks are affected: Barclays was the first to substantially assist the investigations and to admit its mistakes – this is now backfiring on the bank. “This week, all attention is focused on Barclays, because we were the first ones”, underlines Diamond.