Deutsche Bank likely to pay record $1.5-bn fine over Libor manipulation

Deutsche Bank, Germany's largest lender, is likely to be fined more than $1.5 billion over allegedly manipulating Libor, which would be the biggest fine imposed on a bank for rigging the London interbank offered rate.

The Frankfurt-based lender is in talks with US and UK regulators to settle allegations of colluding to fix benchmark interest rates, The New York Times yesterday reported, citing people briefed on the matter.

An agreement could be reached by the end of April, but the terms have not been finalised, which indicates that the fine could go higher. A Deutsche Bank subsidiary could also plead guilty as part of the deal, the report added.

Deutsche Bank is expected to pay more than $1.5 billion in total to regulators from the US and the UK, which will eclipse the recent settlements made by rival banks over Libor manipulations.

As part of the settlement, the US Justice Department may insist that Deutsche Bank's British subsidiaries plead guilty to fraud.

The settlement would come after Deutsche Bank last year paid a €725 million fine to the European Commission for rigging yen Libor and the Euro Interbank Offered Rate, known as Euribor.

Other banks who have paid fines for rigging the Libor are Barclays, UBS, JPMorgan Chase, Citigroup, Royal Bank of Scotland, HSBC and Rabobank of the Netherlands, while probes are continuing on other big US banks.

The Libor is set by a British banking trade group every morning after the 16 international banks submit estimates of what it cost them to borrow.

By manipulating the Libor, which is used to help establish the price for a range of financial products, banks could claim they were in better financial health than was the case.

The Libor rate is calculated every day when banks submit their rates to Thomson Reuters, the news and financial data provider, which uses strict processes to ensure that the setting of the rate cannot be influenced by any individual bank.