Deutsche Bank AG managed to almost double the record fine the U.K. regulator handed down for rigging Libor through its foot-dragging and evasions, the Financial Conduct Authority said.
“Deutsche Bank’s unacceptably slow and ineffective response” to questions and repeated “false, inaccurate or misleading” statements were cited as reasons for the FCA to tack on an additional 101 million pounds ($152 million) to bring the settlement to 227 million pounds, the FCA said Thursday.
“The size of the fine and the proportion allocated for making false statements underlines the critical importance of cooperating and working with the regulator in its inquiries,” said Stephen Parkinson, a London-based lawyer at Kingsley Napley LLP. “Failure to do so will inevitably come back and bite you.”
This was the first time, of the eight fines the U.K. has levied against firms for rigging the London interbank offered rate, that the FCA has included a penalty for not dealing with the regulator “in an open and cooperative way” -- one of 11 principles U.K.-regulated firms must adhere to.
A spokeswoman for Deutsche Bank said the lender has spent billions of euros strengthening its systems and controls and recognizes there were delays in collecting and producing documents for the regulator.
Deutsche Bank was fined a record $2.5 billion by three U.S. agencies and the FCA for rigging Libor, the benchmark for $300 trillion of securities, from interest-rate swaps to mortgages and student loans. It’s one of the last to settle on Libor-rigging. About a dozen firms have reached accords globally, with penalties reaching $9 billion in total.
The FCA cited numerous examples of how the bank deceived British investigators and dragged out the probe.
On Feb. 4, 2011, Deutsche Bank was asked to certify its systems and controls for Libor submissions were adequate. A compliance officer looked into the matter and found there weren’t any. One month later, the regulator got a statement signed by senior management saying systems were in place, spot checks on Libor submissions had been carried out and a monitoring tool had been set up to flag key words or phrases that might indicate misconduct.
None of this was true, according to the FCA.
On May 4, 2011, Deutsche Bank was ordered to preserve all recorded telephone calls by individuals making Libor submissions or trading related derivatives. The bank said its compliance department would preserve communications from Dec. 1, 2010, until further notice. In July 2012, Deutsche Bank destroyed 482 tapes of telephone calls that fell within the scope of the order. This was by accident, the FCA said in the settlement.
Still, “the most egregious” inaccurate and misleading statement was yet to come, the FCA said.
German finance regulator Bafin had commissioned a review of Deutsche Bank’s Libor conduct in 2012. It concluded in 2013 and was handed over to the bank. When the FCA asked to see the report, Deutsche Bank refused, saying Bafin wouldn’t let it be shared.
There was no such prohibition. The German lender didn’t agree with some of the criticisms and wanted to keep the report confidential, according to the FCA.
“Deutsche Bank’s failings were compounded by them repeatedly misleading us,” Georgina Philippou, acting director of enforcement and market oversight, said in an e-mailed statement. “This case shows how seriously we view a failure to cooperate with our investigations.”