Regulator finds flaws in Deutsche Bank's Libor supervision

Thu Mar 21, 2013 8:55am EDT
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FRANKFURT (Reuters) - German markets watchdog Bafin is set to tell Deutsche Bank (DBKGn.DE: Quote) of "organizational flaws" in how it supervised its contribution to the setting of inter-bank lending rates at the heart of the international rate-rigging scandal, sources familiar with the watchdog's investigation said.

Bafin, which has been investigating Deutsche Bank's involvement in setting the London Inter-Bank Offered Rate, or Libor, is primarily seeking to get the shortcomings corrected, one of the sources said.

Banks are usually quick to correct errors in their systems, even before regulators ask them to do so, the person said.

Bafin and other regulators have been investigating whether banks sought to manipulate Libor and its euro zone counterpart, Euribor, a key measure of how much banks pay to borrow from each other which is used as the basis for setting lending rates on a wide range of financial products from mortgages to complex derivatives.

While Bafin itself cannot impose fines, its report is expected to feed into settlement talks between Deutsche and regulators in the United States and the UK.

Deutsche has already made provisions for possible fines in the Libor case, sources close to the lender have told Reuters previously.

Swiss bank UBS UBSN.VX and Britain's Barclays (BARC.L: Quote) have already paid a total of nearly $2 billion to settle rate manipulation allegations, while Royal Bank of Scotland (RBS.L: Quote) has been fined $612 million.

German financial daily Handelsblatt also reported on Thursday that Bafin was homing in on organizational issues at Deutsche.

The regulator's findings would not hold co-chief executives Anshu Jain and Juergen Fitschen to be at fault and there would be no consequences for other current or former board members at Germany's flagship lender, the paper said, citing "insiders."   Continued...

A Deutsche Bank logo is pictured in front of the Deutsche Bank headquarters in Frankfurt February 24, 2011. After a three-year renovation period the two Deutsche Bank towers are re-opened. REUTERS/Ralph Orlowski