Deutsche Bank to pay record $2.5 billion for rate manipulation

Deutsche Bank will pay a record $2.5 billion in fines and fire several top employees to settle government charges it conspired to manipulate benchmark interest rates.

The settlement, struck with several American and British regulators, draws to a close a long-running probe of whether bank employees conspired to beneficially alter market rates, including the London Interbank Offered Rate, or LIBOR, that provide the basis for trillions of dollars’ worth of other lending products.

{mosads}Under the terms of the deal, the bank will pay $775 million to the Justice Department, $800 million to the Commodity Futures Trading Commission, $600 million to the New York State Department of Financial Services, and roughly $340 million to the United Kingdom’s Financial Conduct Authority. The fine are the largest ever levied against a bank for manipulating benchmark rates.

Several banks have already paid fines to settle charges employees altered reports on borrowing costs to gain a profitable edge.

The government claims that from 2005 to 2009, some Deutsche Bank traders regularly pushed employees that submit rates to alter the numbers in a way that helped their trading position. In addition to altering LIBOR, the government claimed bank traders pushed to manipulate other benchmark rates like the Euro Interbank Offered Rate and the Euroyen Tokyo Interbank Offered Rate.

As part of the terms of the settlement, regulators also demanded the bank fire seven employees tied to the practice that are still employed by the bank, including a London managing director, several other directors, and vice presidents based in London and Frankfurt. Regulators noted that several employees embroiled in the practice have already been removed. On Wednesday, the bank announced it had set aside $1.6 billion for legal expenses.

In November, American and British regulators announced settlements totaling billions of dollars against some of the largest names in finance. And in 2012, UBS agreed to pay $1.5 billion for its role in interest rate manipulation.

Thursday’s settlement is also the latest legal woe for Deutsche Bank. In December, the government sued the bank for engaging in tax evasion schemes in an effort to avoid paying more than $190 million in taxes.