* Deutsche Bank regulatory chief faces questions at Berlin hearing
* Deutsche Bank has made provisions for Libor probe - board member
* Bank declined to quantify size of provisions made for Libor probes
By Edward Taylor and Matthias Sobolewski
BERLIN, Nov 28 German politicians called for tighter regulation of global interest rates after questioning Deutsche Bank about the manipulation of London's Libor benchmark lending rate.
The flagship lender said it had made some provisions to cover the costs of various probes of possible manipulation of benchmark interest rates and reiterated that there were no signs that senior management had behaved inappropriately.
But politicians in Berlin were unimpressed.
Representatives from the Greens, SPD and the conservative Christian Democrats (CDU) were left dissatisfied with "meagre" responses to their questions and called for stronger regulation of the London interbank offered rate (Libor) in the wake of manipulation that came to light earlier this year.
"There has to be much stronger controls. Here we have another example where the freedom of the markets was abused," said Klaus-Peter Flosbach of the CDU.
Libor, used to price billions of dollars' worth of financial contracts, was thrown into the spotlight in June when the UK and United States fined British bank Barclays a record $450 million for fixing rates during the credit crunch.
Deutsche Bank is talking to authorities in the United States and Europe investigating the setting of rates between 2005 and 2011.
Deutsche Bank board member Stephan Leithner, in charge of regulation, was quizzed by the German Bundestag lower house's Finance Committee on Wednesday after the bank decided not to send Co-Chief Executive Anshu Jain.
In a tense two-hour session, Leithner provided few answers to repeated questions about Deutsche's involvement in the scandal.
"We are working with authorities under strict confidentiality and therefore cannot give specific details about the status of probes," Leithner told the hearing.
Leithner, however, did say the bank had made provisions to cover the various regulatory probes, without quantifying the size of such provisions.
Asked whether the bank expects to make provisions for damage claims related to class-action lawsuits, Leithner said he did not currently foresee damage payments.
Among the politicians who called for rate-setting to be regulated was Lothar Binding, from Germany's opposition Social Democrats (SPD), who described Leithner's answers as "meagre."
"This was a real cover-up. If the boss doesn't come on stage it leaves a bad impression," Binding said, referring to Jain.
Green party politician Gerhard Schick added that the promised change of culture towards an open dialogue with society by the new leadership at Deutsche Bank "was not evident".
Leithner repeated a previous admission by the bank that some of its staff had not behaved appropriately, but that no members of the management board were involved.
"The current challenge is to restore trust. This is why we are taking it very seriously," Leithner told the hearing.
The probe is likely to strain an already-tense relationship between bankers, who prefer to keep out of the public eye, and politicians, who are eager to demonstrate their grip on the world of global finance.
German regulator BaFin said banks were cooperating well with investigations. BaFin launched a special investigation of Deutsche Bank in July. Raimund Roeseler, head of bank supervision, said BaFin had become aware of Libor as a potential issue in spring 2010, after the U.S. Commodity Futures Trading Commission told German regulators it had questioned a bank about Libor.
Deutsche had been cooperating with authorities on matters related to Libor for some time but German regulator BaFin in July decided to launch a so-called special probe of Deutsche Bank, Roeseler said.
BUBA AGAINST INTERFERENCE
Germany's Bundesbank has urged Berlin's lawmakers not to interfere in efforts to overhaul a system for setting global benchmark interest rates, a filing to the parliamentary hearing in Berlin showed.
In a letter addressed to the hearing, Bundesbank board member Andreas Dombret urged lawmakers to let markets decide about rates.
"Any change to a different reference interest rate should be a matter of free choice for markets and not imposed through lawmakers," the letter said.
Because Libor remains so entrenched in financial markets, regulators are working on ways to reform, rather than replace it.
Dombret said benchmark rates should take greater account of actual transactions, rather than relying only on estimates.
Regulators fear that Libor remains vulnerable to manipulation as banks are asked to submit only a hypothetical estimate about their expected borrowing rate, rather than disclosing the actual prices of completed transactions.