Deutsche Bank, like many major banks on both sides of the Atlantic, is under investigation for manipulating the LIBOR interest rate, which governs financial transactions the world over. German officials are “conducting a so-called special probe — the most severe form of investigation it can undertake — into Deutsche Bank as part of a broader global investigation of interbank lending rates.”
According to the Wall Street Journal, Deutsche Bank made $654 million trading on LIBOR and other interest rates in 2008. And one former employee says that the bank’s executives blew off warnings about the riskiness of such trades because “the bank could influence the rates they were betting on”:
The interest-rate bets included an estimated potential profit of €24 million for each hundredth of a percentage point that the three-month U.S. dollar Libor increased compared with the one-month U.S. dollar Libor, according to the documents.
The former employee has told regulators that some employees expressed concerns about the risks of the interest-rate bets, according to documents. He also said that Deutsche Bank officials dismissed those concerns because the bank could influence the rates they were betting on.
Two major banks — Barclays and UBS — have already settled with regulators over charges stemming from LIBOR rigging.