* Four traders win case for wrongful dismissal
* Judge says termination was "out of proportion"
* Deutsche Bank says to decide on possible appeal later
By Edward Taylor
FRANKFURT, Sept 11 Four traders have won a case
for wrongful dismissal against Deutsche Bank AG,
which had accused them of violating company policy by
inappropriately communicating with other traders at the bank
over the setting of interbank lending rates.
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 labour 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
Deutsche had told the Frankfurt Labour 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
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 organisational
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
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 behaviour.
"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
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 coloured suits, said Deutsche had begun analysing
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.