Ex-Deutsche Bank Manager Cloete Slams German Libor Criticism

  • Cloete submits response to German regulator in August
  • Letter contains details of trader firings for Bittar, Adolph

A former global finance chief at Deutsche Bank AG said the German market regulator ruined his reputation after it claimed he and other managers may have turned a blind eye to Libor manipulation.

Alan Cloete said in an Aug. 10 letter to the agency, Bafin, that he has suffered “as a result of the inaccurate and reputationally damaging assessments” by it. His letter, which was seen by Bloomberg, demanded the regulator issue a correction.

Bafin said in May it had doubts about statements by Cloete that he and others including former co-Chief Executive Officer Anshu Jain were unaware of the rigging of the London interbank offered rate. Deutsche Bank paid a record $2.5 billion in fines to global authorities in April over manipulation of Libor and related benchmarks.

“Cloete did not give any instructions to manipulate Libor, he was not aware that there was any manipulation or intention to manipulate,” Cloete’s lawyers said in the 57-page letter. “Nor would he have tolerated this had he known about it.”

Business Culture

Bafin said Cloete promoted a business culture and environment that allowed Libor manipulation to go on. In Cloete’s response, translated from German, he’s attached e-mail conversations with senior management, including Jain, showing the actions he took against employees when he became aware of the scandal.

These include firing high-profile traders Guillaume Adolph and Christian Bittar and cutting the pay of Bittar’s manager David Nicholls by 30 percent.

"All of the affected traders/submitters were dismissed or made redundant," Cloete said in the letter. "Training was introduced and supported."

Bafin commissioned Ernst & Young to do the investigation into Libor rigging at Deutsche Bank. Cloete was interviewed three times in 2014 as part of its probe, according to the letter.

Banking Regulator

In July, the German banking regulator cleared Jain of misleading the Bundesbank about his knowledge of the company’s role in attempts to manipulate benchmark interest rates.

Bafin declined to comment, as did lawyers for Cloete and Adolph. Lawyers for Nicholls and Bittar didn’t immediately respond to a request for comment.

“We continue to work with our regulator to bring this inquiry to a conclusion,” Deutsche Bank said in an e-mailed statement Thursday.

Cloete, who built Deutsche Bank’s structured credit finance business, led operations in the Asia-Pacific region with former India chief Gunit Chadha. Cloete was a potential candidate to succeed Jain as head of the investment banking and trading unit when Jain became co-chief executive officer with Juergen Fitschen in June 2012.

At 49, Cloete was named to the group executive committee. The panel is the highest-ranking body after the management board and his nomination came as Jain promoted bankers he’d worked closely with. Cloete left the bank in August.

Bank Investigations

Regulators have been investigating how banks manipulated interest-rate benchmarks for the last seven years with fines of about $9 billion levied against a dozen institutions. Libor and its counterparts are used to value trillions of dollars of securities from student loans to mortgages.

Deutsche Bank, Europe’s biggest investment bank, has other legal woes. It’s currently the subject of a U.S. Justice Department investigation of billions of dollars of trades made on behalf of Russian clients as recently as this year, people with knowledge of the situation have said. The lender’s own probe has focused on whether $6 billion in trades in Moscow and London were part of a possible money-laundering scheme by Russian clients, Bloomberg reported in June, citing people familiar with the situation.

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