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Deutsche Bank settles with US, UK for $2.5bn

German banking giant Deutsche Bank has been fined $2.51 billion over its role in a vast multi-year conspiracy to rig LIBOR interest rates, US and British authorities said Thursday.

Published: 23 April 2015 15:26 CEST

Deutsche Bank settles with US, UK for $2.5bn

Deutsche Bank co-chairman Jürgen Fitschen (l) at a press conference in 2012. Photo: DPA

The case centers on charges that Deutsche Bank derivatives traders manipulated the London InterBank Offered Rate, used to peg millions of interest rate-sensitive contracts and loans around the world, from at least 2003-2011 to boost their trading positions.

Under the deferred prosecution agreement, Deutsche Bank agreed to plead guilty to a US charge of wire fraud, a criminal offense, in connection with the scam and admitted participating in price-fixing conspiracy.

Deutsche Bank employees defrauded counterparties in emails, telephone calls and electronic chats.

"Deutsche Bank admitted to manipulating benchmark interest rates in currencies around the globe in order to benefit trading positions," the Justice Department said in a statement.

"This wide-reaching investigation represents yet another step in the FBI's ongoing effort to find and stop those who deliberately participate in complex financial crimes to further their own bottom line."

The breakout of the fine included $1.4 billion in penalties to the Justice Department, $800 million to the US Commodity Futures Trading Commission, $600 million to the New York Department of Financial Services and $344 million to Britain's Financial Conduct Authority.

SEE ALSO: US sues Deutsche Bank over tax scam

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Sweden's Riksbank raises rates above zero for first time since 2014

In a press release announcing the move, the bank said that it needed to take action to bring down the current high rate of inflation, which it predicts will average 5.5 percent in 2022, before sinking to 3.3 percent in 2023.

“Inflation has risen to the highest level since the 1990s and is going to stay high for a while. To prevent high inflation taking hold in price and wage developments, the directors have decided to raise interest rates from zero to 0.25 percent,” it said.

The Riksbank, which is tasked by the government to keep inflation at around two percent, has been caught off-guard by the speed and duration of price rises.

Just a few months ago, in February, it said it expected inflation to be temporary, predicting there was no need to increase rates until 2024.

The last time the key inflation rate was above zero was in the autumn of 2014.

In the press release, the bank warned that the rate would continue to increase further in the coming years.

“The prognosis is that the interest rate will be increased in two to three further steps this year, and that it will reach a little under two percent at the end of the three-year prognosis period,” it said.

According to the bank’s new future scenarios, its key interest rate will reach about 1.18 percent in a year, and 1.57 percent within two years.

In a further tightening of Sweden’s monetary policy, the bank has also decided to reduce its bond purchases.

“With this monetary policy we expect inflation rates to decline next year and from 2024 to be close to two percent,” the bank wrote.

Annika Winsth, the chief economist of Nordea, one of Sweden’s largest banks, said the rate hike was “sensible”.

“When you look at how inflation is right now and that the Riksbank needs to cool down the economy, it’s good that they’re taking action – the earlier the better. The risk if you wait is that you need to righten even more.”

She said people in Sweden should be prepared for rates to rise even further.

“You shouldn’t rule it out in the coming year. Then you’ll have a once percentage point increase which will go straight into fluctuating mortgage rates.”

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