Two managing directors were among five employees Deutsche Bank AG suspended in Frankfurt this week over suspected manipulation of interest rates, according to two people with knowledge of the matter.
Two directors and a vice president, who were also responsible for submitting euro interbank offered rates, were the other staff suspended, according to the people, who asked not to be identified because they’re not authorized to speak publicly on the matter. The firm replaced them with colleagues based in London to ensure continuity for its clients, said one of the people, who declined to name them.
Regulators from Canada to Switzerland are investigating whether more than a dozen banks, including Deutsche Bank, colluded to rig lending rates. Royal Bank of Scotland Group Plc, Britain’s biggest publicly owned lender, was fined about $612 million by U.S. and U.K. authorities yesterday after 21 of the bank’s employees were found to be involved in wrongdoing.
A spokesman for Deutsche Bank, Europe’s biggest bank by assets, declined to comment on the identity or responsibilities of any staff it has suspended. The lender will fire or suspend staff found to have acted inappropriately, he said in an e-mailed statement.
Deutsche Bank employed 9,094 full-time front-office staff at its investment banking unit at the end of 2012, company filings show.
Co-Chief Executive Officer Anshu Jain was head of the investment bank at the time of the alleged rate-rigging and said last month that the scandal “sickens” him. Bank CEOs discussed a global settlement of the matter at the World Economic Forum in Davos last month, he said last week.
The firm said in July that an internal investigation of interbank rates found misconduct by individual employees though no wrongdoing by current or former members of the board. Deutsche Bank dismissed two traders at the end of 2011 for suspected manipulation of the rates.
Deutsche Bank lost 0.7 percent to 36.94 euros at 2:57 p.m. in Frankfurt, heading for the first weekly fall since Jan. 18.
The five individuals suspended this week had contact with at least one of the two dismissed traders, the people familiar said today.
Euribor is derived from a survey of banks asking how much it costs them to borrow from one another in euros for periods from overnight to one year. About 241 trillion euros ($327 trillion) of interest rate swaps are tied to three-month Euribor alone.
The bank probably won’t resolve all issues pertaining to alleged manipulation of borrowing rates this year, Stephan Leithner, the company’s management board member for legal affairs, said last week.
Like the London interbank offered rate, Euribor is based on estimates rather than actual trade data, leaving the rate vulnerable to manipulation. The 39 banks that contribute to the rate outnumber the 18 that help set dollar Libor, making it harder for individual traders to rig it.
Deutsche Bank, which says it is cooperating with the authorities in their probes, is also the subject of civil litigation related to alleged rate-rigging, according to the company.
Banks are the target of legal proceedings as regulators probe firms over claims they used interbank rates to artificially understate their cost of borrowing or profited from bets on interest-rate swaps.
The RBS settlement made yesterday is the third in the probe of global interest rate benchmarks. Barclays Plc agreed to pay 290 million pounds ($456 million) in June while UBS AG settled manipulation and criminal charges with regulators for 1.4 billion Swiss francs ($1.5 billion) in December.
At seven, the number of Deutsche Bank staff who may have sought to rig rates is so far lower than at the three banks that have settled. Barclays disciplined 13 employees and dismissed five, Rich Ricci, head of corporate and investment banking, told British lawmakers on Nov. 28. About 40 individuals at UBS, including 11 managers, sought to manipulate the rates. At least two further managers and five senior managers were aware of the practice, Britain’s Financial Services Authority has said.