September 11, 2013 / 6:45 PM / 6 years ago

Deutsche Bank traders win unfair dismissal case

FRANKFURT (Reuters) - Four traders have won a case for wrongful dismissal against Deutsche Bank AG (DBKGn.DE), which had accused them of violating company policy by inappropriately communicating with other traders at the bank over the setting of interbank lending rates.

A logo of Deutsche Bank AG is seen in Tokyo September 9, 2013. REUTERS/Toru Hanai

The four were responsible for setting Euribor and Libor interbank rates and their dismissal in February came amid a broader inquest into interbank rates. Three banks have been fined for manipulating Libor, a larger counterpart to Euribor, and investigations are continuing into the matter.

Rates such as Euribor and Libor are hugely important in financial markets, not just as key gauges of how much banks pay to borrow from their peers but also to set prices for financial products from mortgages to complex derivatives.

Announcing her ruling relating to the ex-Deutsche Bank traders on Wednesday, presiding judge Annika Gey told a Frankfurt labor court: “The termination was out of proportion”.

She ordered Deutsche to reinstate the traders and pay them their salaries for the period since they were fired in February. The traders’ lawyer said they did not wish to be named.

Deutsche Bank said in a statement: “We regret the court’s decision and believe our action in this matter was justifiable .. . We wait for the written judgement and will then decide whether we will appeal the decision.”

The bank had fired five Frankfurt-based traders suspected of inappropriate conduct following an internal investigation into possible manipulation of the Europe Interbank Offered Rate or Euribor. One had already reached a settlement with Deutsche Bank.

Deutsche had told the Frankfurt Labor court it had fired the five after discovering some staff appeared to have shown a willingness to consider the bank’s own trading positions when they submitted their estimates for the Euribor and Libor rates.

But the traders said they were not aware of a ban prohibiting them from talking to other trading desks about interbank lending matters.

Deutsche’s own trading positions at other desks within the bank could increase or decrease in value depending on what kind of interbank lending rate was determined by the money markets team.

Deutsche’s lawyers told the court it was forbidden to discuss Euribor and Libor submissions with derivative dealers and said the traders should have submitted estimates for interbank lending rates in a manner which was totally objective.

German financial regulator BaFin and other regulators are investigating Deutsche Bank over allegations it helped manipulate benchmark interest rates such as Libor and Euribor. As part of its probe, BaFin had been focusing on organizational issues. It has said that a key question was whether banks reacted quickly enough once the Libor problems became known, and whether they reached the right conclusions.


The traders said they believed Deutsche had appeared to condone collaboration between different parts of the trading desk when it imported to Frankfurt a “short-term interest-rate trading” seating arrangement used in Asia, whereby money-market traders, swaps traders and derivative traders sat in close proximity.

The traders, speaking through their lawyer, said their discussions did not amount to collusion or manipulation so much as “an exchange of opinion about the state of the market.”

One of the traders said it was impossible to be completely objective about submitting an inter-bank lending rate if you were also aware the bank held a trading position that could be influenced by a change in the direction of the benchmark rate.

“You cannot take this position out of your head. It is extremely important to know what the demand is like in the market,” he said in court.

The judge said Deutsche had failed stop these interactions with specific guidelines or sanctions or make sufficiently clear that this was inappropriate behavior.

“At the time these contested communications occurred, Deutsche Bank had not implemented clear rules or controls to ensure a strict separation between submitters and derivatives traders,” the judge said.

Furthermore, the court said Deutsche had operated a system with substantial conflicts of interest, since one trader who made a submission for interbank lending rates was also a derivatives trader.

The traders, speaking through their lawyer, told the court that both money market traders and derivatives traders were included on common e-mail exchanges which had up to 70 recipients. Traders from both groups were on common conference and video calls, they said.

On discovering signs of what it viewed as misconduct, Deutsche Bank had also failed to issue a formal warning to the traders and therefore to fire them at a later point was too severe, the judge said.

The traders, who appeared in court wearing dark blue and charcoal colored suits, said Deutsche had begun analyzing messages between traders in 2011 but had only fired the Frankfurt team in 2013.

The traders’ lawyer said he was satisfied with the ruling.

Deutsche was among more than 40 banks contributing to setting Euribor. Deutsche Bank changed its rules about Libor submissions in March 2012, and its rules on Euribor in July 2012, the bank told the court.

Editing by David Holmes and Alexander Smith

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