Famed for its work on blockbuster M&A, Slaughter and May had five partners working around the clock as Deutsche Bank received a $2.5bn fine from regulatory authorities in the US and UK over investigations into its role in the manipulation of interest rates Libor and Euribor between 2005 and 2010.
Slaughters’ head of dispute resolution and global investigations groups Deborah Finkler marshalled the German bank’s dealing with the City watchdog, the Financial Conduct Authority (FCA), with disputes partner Ewan Brown also playing a major role in orchestrating the settlement. A senior team in Manhattan at Paul, Weiss, Rifkind, Wharton & Garrison including partners Roberto Finzi and Andrew Finch handled the US end of the investigation, while Hengeler Mueller’s Sven Schneider handled the defence in Germany.
The bulk of the penalty will be split between US authorities, with $800m going to the Commodities Futures Trading Commission, $775m to the US Department of Justice and $600m going to the New York State Department of Financial Services.
The UK’s FCA took $340m, or £227m, of the penalty for manipulating interest rates. The FCA found that the misconduct, which ranged from colluding with other panel banks that set Libor and Euribor to putting cash into the market to trick submissions at other banks, involved at least 29 Deutsche Bank staff across London, Frankfurt, Tokyo and New York. It has been a contributor bank for Libor fixes in ten currencies, including the US Dollar, Swiss Franc and Pound Sterling from at least 1998 to the present, that sets the lending rates for lending around the world, from mortgages to business lending.
The fine was levied because of what the FCA labelled a ‘deeply ingrained’ culture of ‘generating profits without proper regard to the integrity of the market’ and its attempt to mislead the regulators by giving the FCA misleading information about its ability to provide a report commissioned by the German regulator, BaFin, and providing false information about its systems and controls around Libor.
Georgina Philippou, the FCA’s acting director of enforcement and market oversight, said: ‘This case stands out for the seriousness and duration of the breaches by Deutsche Bank – something reflected in the size of today’s fine. Deutsche Bank’s failings were compounded by them repeatedly misleading us. The bank took far too long to produce vital documents and it moved far too slowly to fix relevant systems and controls.’
Jürgen Fitschen and Anshu Jain, Deutsche Bank co-chief executives, said: ‘We deeply regret this matter but are pleased to have resolved it. The Bank accepts the findings of the regulators. We have disciplined or dismissed individuals involved in the trader misconduct; have substantially strengthened our control teams, procedures and record-keeping; and are conducting a thorough review of the Bank’s actions in addressing this matter.’